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Costs for decision making : an instructional case of relevant costs and differential analysis of cost reduction alternatives / Scott McGregor.

By: Material type: TextSeries: Publisher: London : Institute of Management Accountants, 2016Description: 1 online resource : illustrationsContent type:
  • text
Media type:
  • computer
Carrier type:
  • online resource
ISBN:
  • 9781526426307 (ebook) :
Subject(s): DDC classification:
  • 658.1552
Online resources: Textbook questions and cases often ask students to use differential analysis to evaluate one independent cost reduction action. But businesses often have multiple cost reduction alternatives to evaluate simultaneously. Furthermore, companies may consider these options independently or through combinations of alternatives. The case is based on an actual project to evaluate alternative cost reduction actions at a large insurance company. For educational purposes, the scope of the project has been significantly reduced to one function, the accounting department, to provide students with a realistic situation in a manageable format. Students are presented with three alternative cost reduction approaches and must identify the relevant costs and calculate the estimated potential impacts of each alternative. The cost reduction actions evaluated are outsourcing ("offshoring"), greater automation, and an office relocation. Additionally, the students must identify the risks and other nonfinancial considerations associated with the potential cost reduction actions and make a recommendation.
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Originally published in McGregor, S. (2016). Costs for decision making: An instructional case of relevant costs and differential analysis of cost reduction alternatives. IMA Education Case Journal, 9(3), Article 3.

Textbook questions and cases often ask students to use differential analysis to evaluate one independent cost reduction action. But businesses often have multiple cost reduction alternatives to evaluate simultaneously. Furthermore, companies may consider these options independently or through combinations of alternatives. The case is based on an actual project to evaluate alternative cost reduction actions at a large insurance company. For educational purposes, the scope of the project has been significantly reduced to one function, the accounting department, to provide students with a realistic situation in a manageable format. Students are presented with three alternative cost reduction approaches and must identify the relevant costs and calculate the estimated potential impacts of each alternative. The cost reduction actions evaluated are outsourcing ("offshoring"), greater automation, and an office relocation. Additionally, the students must identify the risks and other nonfinancial considerations associated with the potential cost reduction actions and make a recommendation.

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