Overview

Chapter Objectives

Identify relevant and irrelevant costs in a business decision.
Conclude whether a business segment should be added or dropped.
Conclude whether a special order should be accepted.
Solve for the most profitable use of a constrained resource.
Conclude whether joint products should be sold at the split-off point or processed further.

In this chapter, we will cover different business decisions that are frequently made. These topics include: adding or dropping a business segment, evaluating special orders, how to most profitably utilize constrained resources and joint products. The key analysis for all of these decisions are identifying relevant and irrelevant costs for the decision.

Readings

Read: Chapter 6, Differential Analysis: The Key to Decision Making in the McGraw Hill textbook.

e-textbook is accessible through McGraw Hill Connect

Slides

During class: Utilize the Lecture slide packet, attached below. We will review these key concepts and work problems together.

- Lecture slides, Chapter 6 (PDF)
- Lecture slides, Chapter 6 (PPT)
- Top Hat questions from class (not available until we complete lecture)

Homework and Cases

The following assignments are due:
- Chapter Homework: HW6
- Team Exercise #3
- Project Part: N/A for this chapter

Resources

Textbook slides, Chapter 6: Additional problems (we will not work during class, but I recommend for extra practice) are available in the textbook slides.

McGraw Hill (and Connect) technical support is available by dialing 1-800-331-5094. The support team is fantastic and happy to help!

Professor Sturgill is happy to help. Ask questions during/before/after class or during student hours. Email contact if these options have been exhausted.

jennys@iastate.edu

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