Nama : Yudistira AKUNTANSI MANAJEMEN
NIM : 12030117140152 KELAS - E
CHAPTER 10
Tactical Decision Making
Tactical Decision Making
Tactical decision making consists of choosing among alternatives with an immediate or limited end
in view. Accepting a special order for less than the normal selling price to utilize idle capacity and
increase this year’s profits is an example. The overall objective of strategic decision making is to
select among alternative strategies so that a long-term competitive advantage is established.
Model for Making Tactical Decisions
How does a company go about making good tactical decisions? We can describe a general approach
to making tactical decisions. The six steps describing the recommended decision-making process are
as follows:
1. Recognize and define the problem.
2. Identify alternatives as possible solutions to the problem; eliminate alternatives that are clearly
not feasible.
3. Identify the costs and benefits associated with each feasible alternative. Classify costs and
benefits as relevant or irrelevant, and eliminate irrelevant ones from consideration.
4. Total the relevant costs and benefits for each alternative.
5. Assess qualitative factors.
6. Select the alternative with the greatest overall benefit.
Relevant Costs Defined
Relevant costs are future costs that differ across alternatives. All decisions relate to the future;
accordingly, only future costs can be relevant to decisions. However, to be relevant, a cost must not
only be a future cost but must also differ from one alternative to another.
Ethics in Tactical Decision Making
In tactical decision making, ethical concerns revolve around the way in which decisions are
implemented and the possible sacrifice of long-run objectives for short-run gain. Relevant costs are
used in making tactical decisions—decisions that have an immediate view or limited objective in
mind.
Relevance,Cost Behavior,and the Activity Resource Usage Model
Flexible Resources Resources
that can be easily purchased in the amount needed and at the time of use are called flexible
resources. For example, electricity used to run stoves that boil fruit in the production of jelly is a
resource acquired as used and needed.
Committed Resources
Committed resources are purchased before they are used. Therefore, there may or may not be
unused capacity that will affect tactical decision making.
Illustrative Examples of Relevant Cost Applications
Make-or-Buy Decisions
Managers are often faced with the decision of whether to make or buy components used in
manufacturing. Indeed, management periodically should evaluate past decisions concerning
production.
Keep-or-Drop Decisions
Segmented reports prepared on a variable-costing basis provide valuable information for these
keep-or-drop decisions. Both the segment’s contribution margin and its segment margin are useful
in evaluating the performance of segments.
Special-Order Decisions
Special-order decisions focus on whether a specially priced order should be accepted or rejected.
These orders often can be attractive, especially when the firm is operating below its maximum
productive capacity.
Decisions to Sell or Process Further
Joint products have common processes and costs of production up to a split-off point. At that point,
they become distinguishable. The ore must be mined, crushed, and treated before the copper and
gold are separated. The point of separation is called the split-off point. Determining whether to sell
or process further is an important decision that a manager must make
Cost-Based Pricing
That is, they calculate product cost and add the desired profit. The mechanics of this approach are
straightforward. Usually, there is some cost base and a markup. The markup is a percentage applied
to the base cost; it includes desired profit and any costs not included in the base cost. Companies
that bid for jobs routinely base bid price on cost.
Target Costing and Pricing
Target costing is a method of determining the cost of a product or service based on the price (target
price) that customers are willing to pay. This is also referred to as price-driven costing.
Predatory Pricing The practice of setting prices below cost for the purpose of injuring competitors
and eliminating competition is called predatory pricing.
Price discrimination refers to the charging of different prices to different customers for essentially
the same product. Note that services and intangibles are not covered by this act.
Fairness and Pricing
Price gouging is said to occur when firms with market power price products “too high.” How high is
too high? Surely, cost is a consideration. Any time price just covers cost, gouging does not occur.
