Describe how the costing techniques are useful in the process of managerial decision making.
Managers make decisions that govern how a company reaches its goals. Many of these goals have financial aspects, such as revenue and profit targets. The level of costs included in such decisions has a major impact on the finances of the company. Reliable reporting of actual costs, accurate estimation of projected costs and the appropriate integration of such costs in managerial decisions is a key component of business operations that meet their targets and further the goals of the company.
Relevant Costs
Typical managerial decision making selects one of two or more alternatives. Costs that remain the same no matter which alternative the manager chooses are not relevant to the decision. In a cost-based decision on out-sourcing, a manager has to consider the cost of the subcontract and the savings in-house. For example, if the company still has to pay the full rent despite having fewer employees,
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