[MEET 8] AKUNTANSI MANAJEMEN - PENGAMBILAN KEPUTUSAN TAKTIS

Summary

In this management accounting lecture, Nilam Kemala covers the essentials of tactical decision-making, focusing on crucial decisions like whether to drop or maintain a product's production. She discusses factors such as relevant and irrelevant costs, segment margins, and alternatives such as reallocating production capacity. The lecture also covers special orders, further processing decisions, and the importance of qualitative factors in decision-making, using examples from businesses like Coca-Cola and an ice cream company. Practical calculations and strategic decision-making are highlighted to help companies increase profitability and efficiency.

Takeaways

• 😀 Tactical decision-making involves analyzing whether to drop, maintain, or stop production of a product based on profitability.
• 😀 Relevant costs in production decisions include direct labor, raw materials, and avoidable fixed overhead costs.
• 😀 Irrelevant costs, such as depreciation and production manager salaries, should not factor into production decisions.
• 😀 A decision to stop production may increase overall company profit if it eliminates avoidable costs, even if the segment shows a loss.
• 😀 The segment margin, which includes variable costs and avoidable fixed costs, helps determine whether a product should be kept or dropped.
• 😀 If production is stopped, any non-avoidable costs like depreciation will still persist, so they don't impact the decision directly.
• 😀 A potential increase in sales from other products (e.g., Fanta) can justify reallocating production capacity from a loss-making product (e.g., Sprite).
• 😀 Renting out idle production capacity to third parties can generate additional income and boost company profit.
• 😀 Qualitative factors, such as employee layoffs, market conditions, and competition, should be considered when making tactical decisions.
• 😀 Special orders (non-regular customer requests) can be accepted if the price covers variable costs and doesn't exceed available production capacity.
• 😀 When evaluating special orders, fixed costs are typically irrelevant, as they are already accounted for in regular orders.
• 😀 For special orders, it is important to ensure that the price is above the variable costs and that there is sufficient idle capacity to accommodate the order.
• 😀 Further processing decisions (e.g., processing raw materials into a more refined product) should be based on whether the additional income exceeds the cost of processing.
• 😀 Joint costs (costs incurred to produce multiple products simultaneously) should be excluded from further processing decisions, as they are irrelevant to the incremental decision-making.

Q & A

What is the key focus of tactical decision-making in management accounting?

Tactical decision-making in management accounting focuses on decisions regarding cost allocation, product continuation or discontinuation, special orders, and further processing of products to maximize profitability.

What costs are considered relevant when deciding whether to drop a product?

Relevant costs include direct labor costs, direct raw material costs, and avoidable fixed overheads. These are costs that can be saved if the product is discontinued.

What are irrelevant costs in the context of a product drop decision?

Irrelevant costs are those that cannot be avoided even if the product is dropped, such as depreciation costs and fixed costs that remain unchanged regardless of production status.

How do segment margins affect the decision to drop or maintain a product?

A segment margin is the contribution made by a product after variable costs are deducted. If a product's segment margin is positive, it can contribute to covering fixed costs, making it beneficial to maintain the product even if it incurs a loss.

What should be considered when analyzing the potential impact of transferring production capacity to another product?

The key factors to consider include the increase in sales and profits from the other product, the potential for idle capacity, and the overall effect on total operating profit.

When should a company accept a special order, and what factors are important?

A special order should be accepted if the offered price is greater than the variable costs associated with fulfilling the order, and if there is idle capacity. Fixed costs are generally not considered in special order decisions.

How do qualitative factors influence decisions regarding special orders?

Qualitative factors such as the potential for damaging relationships with regular customers, the impact on product quality, and long-term strategic goals should be considered before accepting a special order, even if it is profitable in the short term.

What are the advantages of further processing a product before selling it?

Further processing a product can increase its selling price and overall profitability, but only if the additional income generated exceeds the costs of further processing.

What is the distinction between relevant and irrelevant costs when deciding whether to process a product further?

Relevant costs are the costs incurred from further processing the product, such as separable processing costs. Irrelevant costs are joint costs, which are incurred up to the point where multiple products are produced simultaneously.

In the CPO example, how do you determine whether it is profitable to further process the product into cooking oil?

To determine profitability, calculate the additional income generated by processing the CPO into cooking oil (selling price minus production costs) and subtract the cost of further processing. If the additional income exceeds the further processing costs, then further processing is profitable.