3 Applying relevant costing principles The relevant costs are the future, incremental, cash flows arising from any decision. These cash flows are the difference between:
§ the actual cash flow if the course of action is taken, and
§ the actual cash flow if it is not.转自:考试网 - [Examw.Com]
These principles have already been applied to pricing decisions and make versus buy. In this section we look at further short-term decisions.
3.1 Shut-down situations
Part of a business may appear to be unprofitable. The segment may, e.g. be:
§ a product
§ a channel of distribution
§ any other profit centre
In evaluating closure the cost accountant should identify:
§ loss of contribution from the segment
§ savings in specific fixed costs from closure
§ penalties resulting from the closure, e.g. redundancy, compensation to customers
§ alternative use for resources released
§ non-quantifiable effects
§ knock-on impact, e.g. supermarkets often stock some goods which they sell at a loss. This is to get customers through the door, who they then hope will purchase other products which have higher profit margins for them.
Illustration 4 – Applying relevant costing principles
Harolds fashion store comprises three departments – Men’s Wear, Ladies’ Wear and Unisex. The store budget is as follows:
Men’sLadies’UnisexTotal |
发表于 2012-2-23 17:09:42
