Question

2. Mr. Chopra is the CEO of Tasty packaged Foods. They manufacture various products like potato fries, samosas, etc. Post covid, the company is under revenue pressure due to the reduced demand for packaged food. Like every other business, the short-term decision-making process in this business is also a process of selecting the best amongst various alternatives considering the cost-benefit factors and impact on the overall profitability of the firm. These could involve accepting or rejecting a special order, making or buying decisions, product mix decisions, etc. These decisions require different analysis like Contribution margin analysis, relevant and irrelevant cost analysis.

Please describe any 3 of these short term decision strategies with salient features.

The answer should be a min of 1000 words. And in the word format

Answer 1

The decision strategies taken for terms involve the analysis like Contribution Margin analysis ,relevant and irrelevant cost analysis which are described as below :

Salient features of Contribution marginal analysis :This technique in the decision making helps the company in order to analyse the relationship between cost ,volume and profit of packaged food as these figure changes .It is used in the deciion making question like how different action of the company could affect the sale volume of the company ,its general profitability and cost levels .It has the salient features such as :

Ease of use :It is very easy to use as the sales less variable cost is converted to unit based by dividing by the no. of units sold.This tells the owner while decision making that how much profit the company get for each packaged unit sold past the point when the company was at break even .If the fixed expense of the company is smaller than the total contribution then company is profitable.

contigency Analysis :Thi will predict the no. of units of packaged food the company is going to sell next month or even next week.

Existing infoprmation : It important advantage is that it is conducted with the information already been calculated by the management of the company for some other purposes.The company keep the calculation like the sales figures ,cost information .In addition the extra effort is given in this short term decision making strategy is by the owner needs to do classify cost as variable or fixed.

The irrelevant and relevant cost analysis in the short term decision making provide the ability to increase the revenue post covid as the no. of sales already low at current.The irrelevant cost are those cost which are not affected by the managerial decision while the relevant cost are affected by the managerial decision .The other feature is that ireleavnt cost do not change in future when making decision like sunk cost, committed cost ,overhead cost as these cannot be avoided.while two important salient feature of revelant cost are the Occurance in the future and didfferent for different alternatives but it do not make meaning that all cost which incur in the future are not relevant cost .This helps in deciding which alternative should be considered like discounts , price discrimination ,free delivery etc .Hence these were the 3 decision making strategies involved for short term with their salient features .

Have a good day !