ABSTRACT

This chapter describes two specific management accounting methods and techniques, namely cost accounting and capital investment appraisal. It focuses on the price setting, given that this is a major managerial decision-making purpose for which cost accounting information is frequently used. In decision making only the costs that differ among the alternative courses of action are taken into consideration. These are called the differential costs, which may consist of fixed and variable costs. Multi-Criteria Analysis (MCA) establishes preferences between options by reference to an explicit set of objectives that the decision-making body has identified, and it has established measurable criteria to assess the extent to which objectives are achieved. It is important to emphasize that both traditional and activity-based cost accounting systems, instead of consisting of only two stages, may also consist of multiple stages, in which accumulated costs of particular cost pools are not directly traced and reassigned to more cost objects, but indirectly via other cost pools.