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ACCA Applied Knowledge · Financial Accounting · Stakeholders' needs

A manager needs to decide whether to accept a one-off special order at a price below the normal selling price. Which type of information is most relevant to this decision?

Forward-looking incremental costs and revenues from management accounting information are most relevant, because the decision depends on future differences in cash flows. Published financial statements are historic and summarised, so they cannot show the relevant costs of one specific order.

  1. AThe statement of financial position at the last reporting date
  2. BHistoric full-cost profit figures from the published statement of profit or loss
  3. CForward-looking incremental costs and revenues, from management accounting informationCorrect
  4. DThe statement of changes in equity for the prior year

Explanation

Special order decisions depend on future incremental costs and revenues, which management accounting provides. Published statements are historic, summarised and cannot show relevant costs. The statement of financial position and equity statement do not isolate incremental cash flows.

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