4-1.1. Identify Common Operations-Based Decisions

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En provenance du cours de University of Illinois at Urbana-Champaign

Accounting for Business Decision Making: Measurement and Operational Decisions

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University of Illinois at Urbana-Champaign

Accounting for Business Decision Making: Measurement and Operational Decisions

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Cours 3 sur 5 dans Specialization Fundamentals of Accounting

Accounting information is the lifeblood of the organization as it facilitates and influences operational and strategic decisions intended to achieve organizational goals. Organizations benefit from three decision-oriented roles of accounting: measurement, control, and communication. This course provides an introduction to accounting’s measurement role inside of an organization and how accountants communicate information that helps managers and employees make operational decisions. In particular, you will learn how cost information is created and organized to help managers and employees conduct profitability analyses, develop and choose products, make pricing decisions, and make common business decisions. Upon successful completion of this course, you will be able to: • Identify the nature, purpose, and importance of different types of decision-useful accounting information. • Create, organize, and communicate cost information to best suit common operational decisions. • Use accounting information to manage products, control costs, and leverage other drivers of operational success. If you enjoy this business course and are interested in an MBA, consider applying to the iMBA, a flexible, fully-accredited online MBA at an incredibly competitive price offered by the University of Illinois. For more information, please see the Resource page in this course and onlinemba.illinois.edu.

À partir de la leçon

Module 4: Managing Operations and Sales

Owners, managers, and employees often run into two obstacles when making decisions: (1) not enough of the information they need, and (2) too much of the information they don’t need. Surprisingly, the second problem is often harder to overcome than the first, especially in today’s information-rich environment. How do accountants help managers solve this problem? Jump into Module 4 to find out!

4-1.1. Identify Common Operations-Based Decisions4:04

4-1.2. Creating and Using Relevant Information3:17

4-1.3. Application – Make or Buy?11:56

4-1.4. Application – Manage Product Lines9:31

4-1.5. What We’ve Learned0:41

Rencontrer les enseignants

Gary Hecht, Ph.D.
Associate Professor of Accountancy
Department of Accountancy, College of Business

Welcome to the lesson.

By the end of this lesson, you should be able to identify common operational

decisions, define the concept of relevant information, and

use this relevant information.

Now let's broadly distinguish between different types of decisions.

One, we have operational, two, sales oriented, and three, strategic.

I would differentiate this third category,

strategic, in terms of time horizon and focus.

Strategic decisions usually are more long term, and consider the long

term strategy of the firm over five or perhaps ten years into the future.

Operational and sales oriented decisions are a little bit more short term.

They can certainly extend along longer time periods, but

they're primarily focused with today and in your future.

Now in terms of operational decisions, that will be our focus for

this first part of the lesson.

I think about things in four different categories.

Operational decisions can be make or buy.

Adding a product line, eliminating a product line, or

replacing old equipment with new equipment.

These are four main types.

And of course there are others, but these are the ones that we'll focus on.

Now in terms of make or buy decisions, that's basically whether the firm

outsources or insources different activities that are used to create value.

Basically the firm can make an input itself, or

it can buy it from an outside supplier.

We can also think about this in the service, can produce the service itself,

or it can assign it to a third-party.

Another type of decision would be expansion, growth, retraction, or

just general changes in the types of products that the firm offers.

So in terms of growth, managers might wonder whether or

not they need to add a product line.

In terms of retraction or

a change in direction, a firm might decide to eliminate a product line.

Sometimes both of these decisions are made simultaneously,

basically replacing the old with the new.

And speaking of that,

you could think about that decision in relation to the infrastructure as well.

Especially manufacturing facilities have a series of machinery and

equipment that they relied on for the production process.

And managers often have to decide when to replace the old equipment with new or

just continue renting, maintaining, and repairing that old infrastructure.

As you can see,

we have a lot of different operational decisions that we can approach.

We'll focus on make or buy, and then of course, messing around with product lines.

Let's have a checkpoint before we get into the specific examples.

So, one more point before we enter into the examples, and that involves

the different perspectives that you could adopt when approaching these decisions.

Of course, you can adopt a financial perspective.

We'll focus on revenues, costs, profits, and how those change,

depending on the path the manager decides to take.

Well, of course, there are other perspectives to adopt as well.

In particular, a non-financial perspective, but often

times the implications via non-financial perspective are difficult to quantify.

And therefore, it is difficult to combine with that financial perspective.

This is especially the case when we start talking about

strategic considerations that the decision has at it's heart.

While we won't be able to combine both these perspectives in every case,

we'll always have both in mind as we look at

how operational

decisions are made.

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