Tactical Decision Making Group

8/12/2019 Tactical Decision Making Group

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Management Accounting

TACTICAL DECISION MAKING


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MEMBER OF GROUP

Keichy Anomosa 1110532068

Putri Suryani 1110532063

Winda Wulansari 1110532012

Ramagita Iswara 1110532049

Triana W.W.N 1110533046

Yulvita Andriani 1110533025


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LEARNING OBJECTIVES

1. Distinguish between tactical decisionmaking and strategic decision making

2. Explain the tactical decision model

3. Explain relevant costs and irrelevant cost as

well as the examples of relevant costs and

irrelevant costs4. Apply the concept of relevant cost to make

our by decision


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LEARNING OBJECTIVES (Cont.)

5. Apply concept of relevant cost to keep or drop decision

6. Apply concept of relevant cost to special order decision

7. Apply to concept of relevant cost to sell at split offpoint or process further decision

8. Explain the impact of cost on pricing decisions.

9. Use linear programming to find the optimal solution toa problem of multiple constrained resources.


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SUB-TOPICS OF DISCUSSION (Cont.)

Application of relevant cost to make or buy

decision

Application of relevant cost to keep or drop

decision

Application of relevant cost to special order

decision

Application of relevant cost tosell at split off

point or process furthher decision


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TACTICAL DECISION MAKING :

DEFINITION

Tactical decision making consist of

choosing among alternatives with an

immediate or limited end in viewStrategic decision making is selecting

among alternative strategies so that

long term competitive advantage is

estabilished.


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TACTICAL DECISION MODEL

Recognized , define the problem

Identify alternatives , eliminating those that

are unfeasible

Identify costs and benefits

Total relevant costs , benefits of each

alternatives Assess qualitative factors

Select alternative with greatest overall benefit


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Step 1 : define the problem Increase capacity for warehousing and production

Step 2 : identify alternatives 1. Build new facility

2. Lease larger facility ; sublease current facility

3. Lease additional facility

4. Lease warehouse space5. Buy shafts and bushing ; free up space

Step 3 : identify costs ,

benefits

Alt 4: +benefits

Alt 5: +benefits

Step 4 : total relevant costs

and benefits

Alt 4 : cost $1000 rent and make

Alt 5 : cost $ 800 (buy from supplier)

Differential cost $200 (alt 5 chosen)

Step 5 : assess qualitative

factors

1. Product quality

2. Reliability of external supplier

3. Price stability4. Labor relations and community image

Step 6 : make decision Continue producing and lease warehouse (alt 4 is

chosen if assuming qualitative factors are not)


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Relevant Costs Defined

relevant cost is the cost that affects the

decision . The main characteristic of relevant

costs are future costs are future costs that

differ across alternatives


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COST CONCEPTS ASSOCIATED WITH

DECISION MAKING Opportunity cost

Opportunity cost is benefit (revenue) that is sacrificed because of choosing

alternative. For example, salary that you sacrifice because of choosing to study

at the university. Opportunity cost is relevant cost because it affects the

decision that will be made

Avoidable and unavoidable cost

Avoidable cost is the cost that will vanish by choosing the alternatives . For

examples are variable production costs and avoidable fixed factory overhead

cost . Avoidable cost is relevant cost . Unavoidable cost is the cost that will still

occur whatever alternatives are chosen . Avoidable cost is irrelevant cost.

Sunk cost

Sunk cost is cost that occurred because of previous decision , for example

depreciation expense . Sunk cost is relevant cost.

Differential cost

Differential costs are that differ among the alternatives . Differential cost is a

relevant cost .


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APPLICATION OF RELEVANT COST

Make or buy decision

Keep or drop decision

Special order decision

Sell at split off point or process furtherdecision


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When is this decision?When there is supplier offering the samecomponent a lower price

What are relevant costs and irrelevant costs in

this decision?- Relevant costs are avoidable cost

- Irrelevant costs are unavoidable fixed factoryoverhead cost

When is buy decision made?When avoidable manufacturing costs is greaterthan cost of purchase or cost of purchase minusopportunity cost

MAKE OR BUY DECISION


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Example:

Production cost of component X at capacity of 1000 units arefollows:

Unit cost Total

Raw material Rp. 500 Rp. 500.000

Direct Labour 400 400.000

FOH-variable 150 150.000

FOH-fixed 450 450.000Total Rp. 1500 Rp.1500.000

Of total fixed factory overhead cost, included property tax

Rp. 50.000, and depreciation expense of factory buildingRp.200.000. External supplier offers the same componentfor Rp. 1350/per unit.

Required: Should we accept the suppliers offering?


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KEEP OR DROP DECISION Keep or drop decision is the decision about whether or not

a segment , such as a product line , division, or branch

should be kept or dropped When is this decision made ? When the segment is getting

a loss

Segmented report prepared on a variable costing basisprovides valuable information for keep or drop decision

What are relevant costs and irrelevant costs for thisdecision?

- Relevant costs are avoidable costs (variable costs andavoidable fixed costs) and opportunity cost

- Irrelevant costs are unavoidable fixed costs When is drop decision made?

When revenues of dropped segment is lower than theiravoidable costs or when segment has a loss


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PT.Coca Cola producers three products: Coca

Cola, Fanta, and Sprite. The accounting

manager has prepared the following

estimated income statement for 200x (in

thousand of rupiahs) :

Sample Problem


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Coca cola Fanta Sprite Total

Sales 500 800 150 1,450

Variable expenses (250) (480) (120) (850)Contribution margin 250 320 30 600

Direct fixed expenses :

-Advertising (10) (10) (10) (30)

-Salaries (17) (20) (15) (52)

-depreciation (73) (60) (30) (163)

-Total (100) (90) (55) (245)

Segment Margin 150 230 (25) 355Common fixed expenses (40) (40) (40) (120)

Operating income (loss) 110 190 (65) 235


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Because the projected performance of sprite

product line shows a negative segment

margin, management of PT Coca Cola is trying

to decide to drop the Sprite product line.

Required :

What is the best decision for this case?

To drop the sprite product line (assuming the sprite

capacity is idle)

Sprite capacity used for expansion of Fanta product line

(increase sales of 20%)

Sprite capacity can be rented to other party for Rp

50,000


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SPECIAL ORDER DECISION

This decision is related to accept or reject the special order from a

particular customer When is this decision made?

When customer wants to buy the product at highly lower price

Special order is the order from potential customers in markets not

ordinarily served or non regular customers Fixed costs will not be assigned to special order because they have

been fully assigned to regular sales (orders)

What are relevant costs and irrelevant costs for this decision?

- Relevant costs are variable costs and additional costs related to

special order

- Irrelevant costs are fixed cost

When will special order be accepted?

When the price of special order is greater then variable costs and

additional costs related to special order


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SELL AT SPLIT OFF POINT OR PROCESS FURTHER

DECISION

Join product are two or more products that areproduced through a common process

Join products can be identified at a split off point(the point that products are distinguishable ).

Joint costs are the costs to produce the jointproduct

Separable costs are the costs incurred afterproducts are identifiable or costs to processfurther

Sometimes, it is more profitable to process a jointproduct further , beyond the split off point


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What are relevant costs and irrelevant costs forthis decision

- Relevant costs are separable costs andopportunity cost (revenue of split off productforegone because of processing further) as wellas the price after products are processed further

- Irrelevant costs are joint costs When is process the product further decision

made

When additional revenue is greater than separablecost or when sales revenue after products areprocessed further is greater than separable costsand opportunity costs


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the impact of cost on pricing decisions

Costs are important inputs into the pricing

decision. Cost-based pricing uses a markup

based on a subset of costs. Target costing

works backward from a price acceptable toconsumers to find the cost necessary to

manufacture the product.


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Use linear programming to find the

optimal solution

Linear programming is a method that locates

the optimal solution in a set of feasible

solutions. The graphical method may be usedwith two products. When more than two

products are involved, the simplex method is

used.


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Formulasi dari linear programing

Formulasi dari linear programing dibuat dalam

model matematik dan sesuai dengan problem

manajerial, untuk itu perlu diketahui lebih

dahulu: Problem manajerial harus dapat dijelaskan dengan sempurna

Mengidentifikasi mana yang menjadi fungsi tujuan dan fungsi

batasan

Tentukan variabel yang akan menjadi keputusan Variabel-variabel yang ada dalam fungsi tujuan dan batasan

harus dapat diekspresikan dalam bentuk matematik


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Case

Sebuah perusahaan menghasilkan dua macam produk yaitu

tas dan dompet . Jumlah sumber daya yang diperlukan untukmemproduksi kedua macam produk ini adalah kulit danbenang. Setiap unit tas yang dihasilkan membutuhkan kulit

dan benang 0,5m dan 0,25kg. Keperluan untuk dompet setiapunitnya memerlukan kulit 0,25m sedangkan benang 1kg.Sumberdaya yang tersedia di perusahaan setiap bulannyapaling banyak untuk bahan kulit 100m dan benang 100kg.Pada kasus ini masalah yang dihadapi perusahaan adalah

menentukan jumlah tas dan dompet yang akan diproduksiagara perusahaan dapat memperoleh keuntungan yang maxdimana keuntungan per unit untuk tas 1000 dan dompet 250.


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1. Fungsi tujuan(objective function)

Z=1000X+250Y

2.Contraints function (fungsi kendala)

Batasan kulit: 0,50X+0,25Y100

Batasan benang: 0,25X+Y1003. Non negatif contraints

x0; y0


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1. Sumbu kulit

0,5x+0,25Y100

Mis x=0, maka

0,5(0)+0,25y100

X400 ..A(0,400)

Y=0, maka

0,5x+0,25(0)100

Y200.B(200,0)


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2.Sumbu benang

0,25x+y100Mis: x=0,maka

0,25(0)+y100

y100........C(0,100)

y=0,maka

0,25x+0100

X400.D(400,0)


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E:

0,5 x+0,25y 100 1 0,5 x+0,25y 1000,25 x+ y 100 2 0,5 x+ 2y 200

-1,75y -100

y57,1430,5 x+0,25(57,143) 100

x 171,43

E(171,43;57,143)


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Kesimpulan:Dari keempat titik O,C,B,E maka nilai yang palingmaksimal ada di titik B. Berarti produksi tassebanyak 200 unit dan tidak memproduksi

dompet maka keuntungan yang akan di perolehakan maximal yaitu senilai 200.000

Titik Sudut X Y Z=1000x+250y

O 0 0 0C 0 100 25000

B 200 0 200000

E 171,43 57,143 185715,75


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Graphical solutions are not practical with

more than two or three products. Fortunately,

an algorithm called the simplex method can

be used to solve larger linear programmingproblems.

Metode simplek linear programing

dipecahkan secara aljabar


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hanks for attention

Tactical Decision Making Group

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