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Budgeting and Decision Making
Quick questions on Relevant costing for decisions explained: H2 Principles of Accounting
5short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What are special-order decisions?Show answer
For a one-off order with spare capacity, the order is worth accepting if its price exceeds the relevant (usually variable) cost per unit, because fixed costs are already covered by normal business. The order adds its contribution to profit. Strategic factors (effect on regular customers, future pricing) should also be weighed.
What are limiting-factor decisions?Show answer
When a resource is scarce (labour hours, machine hours, materials), rank products by contribution per unit of the limiting factor, not per unit of product:
What is q1?Show answer
A special order is priced at \30\ and there is spare capacity. State whether to accept and why. [2 marks]
What is q2?Show answer
Explain why a sunk cost is irrelevant to a decision. [2 marks]
What is q3?Show answer
Product X gives \404\ using hours. Which should be prioritised? [3 marks]
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