Faisal
Acc 301
(Chapter #20)
faisal.faisal@neu.edu.tr
Incremental Examination Analysis
Relevant information to business decision
Incremental revenue
Incremental cost
Incremental Analysis
Opportunity cost
Sunk cost
Out of pocket cost
BUSINESS DECISION
Spiral order decision
Production constraint decision
Make a big decision
Joint product decision
Relevant information to decision making
Here one identifies all relevant financial information from business decision.
Decisions are whether rejected or accepted related information regarding decision
You must understand the qualitative and
quantitative information on the basis of
judgment we can accept or reject decision
if without using qualitative and quantitative
information.
Continue…
Manager work is not judgment but also have knowledge but must have knowledge of
qualitative and quantitative information.
We collect relevant financial information among different course of action which include cost and revenue.
E.g., relevant financial information varies among different courses of action (if accepted or
rejected). Cost and revenue if doesn’t vary, it is
not relevant financial information to decision.
Incremental Revenue
Example: if university gets closed for one month due to strike but electricity bill will be there
Rent will be there which is fixed cost and cleanup cost (E.g.) if is 2000 revenue→ rent is 10,000 for movie to make
(Rent) Revenue……….10, 000
Electricity bill………15, 000
Operating expenses………...17, 000
Operating loss……….17, 000 /7, 000
Continue..
One the basis of relevant factors, i.e., incremental revenue is the differntiate between cost incurred and revenue earned) we make reject decision.
(Accept and reject) →2 course of action.
Incremental revenue is also known as differential revenue. Incremental cost → differential cost
Incremental revenue in both course of action can be
↑ and ↓.
Incremental analysis examines the difference
between incremental cost and incremental revenue.
Continue…
Reject accept
revenue→0 accept→10,000
