Concept introduction:
Decision making plays an important role in the management. The decisions taken by managers are called managerial decisions. Managerial Decisions are decisions taken by managers for the operations of a firm. These decisions include setting target growth rates, hiring or firing employees, and deciding what products to sell. Manager’s decisions are taken on the basis of quantitative as well as the qualitative measures. The managerial decision includes the decisions like make or buy, accept or reject new offers, sell or further process etc. These decisions are taken on the basis of relevant costs.
Relevant costs are the costs that are relevant for any decision making. Relevant costs are helpful for take managerial decisions like make or buy, accept or reject new offers, sell or further process etc.
Two basic types of the relevant costs are as follows:
- Out-of-pocket costs
- Opportunity costs
To indicate:
The decision to sell or process further for each product
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Managerial Accounting
- Cape Cod Shirt Shop manufactures T-shirts and decorates them with custom designs for retail sale on the premises. Several costs incurred by the company are listed below. For each cost, indicate which of the following classifications best describe the cost. More than one classification may apply to the same cost item. For purposes of classifying costs as fixed or variable, assess cost behavior relative to the output quantity of finished T-shirts. (If your answer is "No" leave the cells blank.) Cost items 1. Cost of fabric used in T-shirt 2. Wages of shirt makers 3. Cost of new sign in front of retail T-shirt shop 4. Wages of the employee who repair the firm’s sewing machines 5. Cost of electricity used in the sewing department 6. Wages of T-shirts designers and painters 7. Wages of sales personnel 8. Depreciation on sewing machines 9. Rent on the building. Part of the building’s first floor is used to make and paint T-shirts. Part of it is used for the retail sales shop. The second…arrow_forwardCape Cod Shirt Shop manufactures T-shirts and decorates them with custom designs for retail sale on the premises. Several costs incurred by the company are listed below. For each cost, indicate which of the following classifications best describe the cost. More than one classification may apply to the same cost item. For purposes of classifying costs as fixed or variable, assess cost behavior relative to the output quantity of finished T-shirts. (If your answer is "No" leave the cells blank.) Cost Items 1. Cost of fabric used in T-shirts. 2. Wages of shirtmakers. 3. Cost of new sign in front of retail T-shirt shop. 4. Wages of the employee who repairs the firm's sewing machines. 5. Cost of electricity used in the sewing department. 6. Wages of T-shirt designers and painters. 7. Wages of sales personnel. 8. Depreciation on sewing machines. 9. Rent on the building. Part of the building's first floor is used to make and paint T-shirts. Part of it is used for the retail sales shop. The…arrow_forwardCape Cod Shirt Shop manufactures T-shirts and decorates them with custom designs for retail sale on the premises. Several costs incurred by the company are listed below. For each cost, indicate which of the following classifications best describe the cost. More than one classification may apply to the same cost item. For purposes of classifying costs as fixed or variable, assess cost behavior relative to the output quantity of finished T-shirts. (If your answer is "No" leave the cells blank.) Cost Items Variable or Fixed? Period or Product? Administrative? Selling? Manufacturing? Research and Development? Direct material, Direct labor, or Manufacturing overhead? 1. Cost of fabric used in T-shirts. 2. Wages of shirtmakers. 3. Cost of new sign in front of retail T-shirt shop. 4. Wages of the employee who repairs the firm’s sewing machines. 5.…arrow_forward
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