Concept Introduction:
Business decisions are a vital part of
What should be done while making short term business decisions.
Answer to Problem 1QC
Separate the variable from the fixed costs
Explanation for correct answer:
By separating the variable from the fixed cost i.e. contribution margin approach concept, a manager can ascertain and take short term managerial decisions in an efficient manner. Thus, this approach is appropriate.
Explanation of Solution
Explanation for incorrect answer:
For taking short term business decision, traditional costing approach is not apt, since it does not include many aspects of the business. Thus, it should be ignored.
Just ascertaining the total cost will not help the manager to take the apt short-term managerial decisions as there are many aspects other than cost such as labor, production etc. thus this total cost principle is ignored.
While taking a short-term business decision, a manager should consider both quantitative and qualitative factors because considering only the quantitative factors will not help in successful decision making. Thus, this approach is ignored.
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Chapter 25 Solutions
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