Managerial Accounting For Dummies

Part III

Using Costing Techniques for Decision-Making

In this part . . .

The costing techniques from Part II come into play in this part, where you see how to use them in order to make management decisions. You first need to understand contribution margin because it provides key insights into how specific transactions affect sales. Contribution margin helps you compute how much you need in sales to break even or achieve a target level of profit.

I also explain how to decide whether to invest in long-term assets, using time value of money techniques. I discuss using contribution margin techniques when you make more than one product; this analysis helps you to decide how much of each product you should make. Next, I explore setting prices and describe transfer pricing techniques that encourage different divisions of a company to work together.