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Introduction

This lesson will look at different types of short-term decisions made by management. You will use differential analysis to help managers make short-term decisions. Knowing what the numbers mean and where they come from is very important, because the world of business changes continuously, and business managers have to be able to make decisions that will positively impact the future of the company. The manager must be able to support these decisions with calculations that indicate how changes are being handled. Differential analysis provides that evidence by concentrating only on the costs and revenue that change as alternative actions are taken.

Lesson Objectives

After completing this lesson, you should be able to determine

• regular and special pricing decisions;
• whether a special order should be accepted;
• when a fixed asset should be retained, sold, or leased;
• when a product line should be discontinued; and
• whether a company should manufacture or purchase components.

Lesson Readings and Activities

By the end of this lesson, make sure you have completed the readings and activities found in the Lesson 15 Course Schedule.