?he association of financial (money) flows Essay
The discovery and application of cost and revenue behavior patterns are relevant in producing information for all types of management decisions in Waitrose Ltd. As noted earlier, one important task of managerial accounting is the association of financial (money) flows with the resource flows that are expected from various decision alternatives (Callahan 3). Costs measured in money terms are associated with these alternatives in order to evaluate them in the context of the enterprise’s long-run goal, which is profit maximization.
The basis of associating these costs in Waitrose Ltd with particular decision alternatives is usually cost behavior patterns derived by the cost behavior analysis. A cost behavior pattern is a functional relationship between various activities or events that represent a decision alternative and the expected cost to be incurred in connection with that alternative (Berry 5). Cost behavior analysis, on the other hand, is the process of the discernment and the description of the forms of these cost behavior patterns.
How are cost behavior patterns used in managerial decision making of Waitrose Ltd? First, the cost-behavior implications of various activities and events are used in constructing an overall cost-function for a decision alternative or variable (Garrison 5). Then the cost function (usually
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Since most of the managerial decision making focuses on the production and sales of products and services, the frequent concern of accountants of Waitrose Ltd is on the use of cost behavior patterns in supplying information for decisions on production and sales. This type of application is called the cost-volume-profit analysis or break-even analysis. This is frequently used in practice and is the most appropriate context in acquainting the reader with the application of cost behavior patterns.