To help decision makers deal with the information overload problem, an understanding of the tools that can help reduce information overload for the decision makers is the only thing that is required of those who wish to support those decision makers.

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If your company was faced with choosing between two projects it could do, with one of the projects being to build tiny houses at a contribution margin of $2000 per house built and the other project being to build storage units at a contribution margin of $1500 per storage unit built, plus knowing that the tiny house project requires two construction crews per house and the storage unit project requires one construction crew per storage unit, plus knowing that your company will only have a maximum of two crews available to dedicate to either project, the obvious choice under the Scare Resource approach within Relevant Costing would be to build tiny houses as it maximizes contribution margin per unit.

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If a manufacturer had fixed costs per year of $100,000 that did not fluctuate from year-to year, and that firm increased its production from 50,000 units per year to 100,000 units per year without having to take on any additional fixed costs, its fixed cost per unit in the second year would be twice as much as in the preceding year.

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Fixed costs remain constant in total (within a relevant range of activity), but differ on a per-unit basis depending upon production or activity, whereas variable costs remain constant on a per-unit basis but vary it total.

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A decision-maker using the Contribution Margin Ratio Method of calculating breakeven in cost-volume-profit analysis should be aware that the method provides its answer in the form of sales dollars and not in units of product.

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The Degree of Operating Leverage is an indicator of how sensitive profit (net income or loss) is to changes in sales volume, so a company with high operating leverage will experience greater volatility of profit with changes in sales than will the company that has low operating leverage a greater stability of profit.

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Jill was supposed to order paper for her publishing company's printing press from the firm's regular supplier, but she instead purchased from an alternate supplier that offered a two dollar per ream discount on the paper, thus making Jill look good for a favorable price variance. The paper turned out to be of inferior quality, thus causing the printing press to jam several times and waste paper, causing 20 percent more paper to be used than normal and making Bob (the printing press operator) look bad due to a sizeable unfavorable materials usage variance. This situation is an example of how two seemingly separate variances could be interrelated.

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While it is often useful to look at the overall total variance numbers that show the difference between budgeted/planned amounts and actual amounts, additional information can be provided to the decision maker by providing a more in-depth analysis that shows the components of the total variance that resulted in that total variance.

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Cost of Capital to a firm can be associated with financing that can be debt only, equity only, or some combination of debt and equity.

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The Contribution Format Income Statement is the format that is intended for external users and is required to be provided by Generally Accepted Accounting Principles, whereas the Traditional Format Income Statement is the format for internal (within the firm) users only and is not mandatory.

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