One of the primary functions of management is decision-making which involves selecting future

courses of action. In making a decision, the costs and benefits of one alternative must be
compared to the costs and benefits of other alternatives. Costs that differ between alternatives are
called relevant costs. Distinguishing between relevant and irrelevant costs and benefits is critical
for two reasons. First, irrelevant data can be ignored—saving decision makers tremendous
amounts of time and effort. Second, bad decisions can easily result from erroneously including
irrelevant costs and benefits when analyzing alternatives. To be successful in decision making,
managers must be able to tell the difference between relevant and irrelevant data and must be
able to correctly use the relevant data in analyzing alternative.

For this assessment, answer the following. Do not attach file.

1. Explain short term non-routine decision making in your own understanding.

Non-routine operational decisions affect profitability, but they have no obvious or direct
impact on an organization's long-term stability and strategy. Profitability is the most important
factor to consider while making non-routine operational decisions.

Non-Routine Decisions are made when the decision maker must use his or her discretion in
dealing with unusual or isolated events. It's particularly dangerous when a wrong decision is
irreversible and results in financial loss. When crucial non-routine choices are made, the
company's typical operating cycle is usually disrupted. When a corporation considers whether to
manufacture or purchase a specific product or material, it is actually considering whether to be a
manufacturer or a merchandiser, each of which has a distinct operating cycle. Another example
is when management is deciding whether to eliminate or keep a business unit, the number of
business units controlled may increase or decrease.

The trial-and-error and wait-and-see technique cannot be used in this case since non-
routine decisions are crucial to the survival and development of organizations. A scientific
technique, which is sometimes referred to as a proven, tried-and-true strategy, will be more
appropriate. It originates from years of study, from research and debates of scholars and
seasoned company managers. It includes the following steps:
1. Define the Problem
2. Specify the criteria
3. Identify different alternatives
4. Develop the decision model
5. Gather Data
6. Evaluate the different alternatives
7. Make a conclusion/decision

2. Identify five (5) short-term non-routine decisions and briefly explain its concept.

Generally, management’s short-term non-routine decisions fall into, but not limited to,
the following categories:
a) Make or Buy decision or Outsourcing decision - This decision puts a company in
the position of having to choose between manufacturing a component part for its
 own usage or purchasing it from an outside provider. It also includes decisions on
establishing service departments like as security, maintenance, accountancy, and
so on, or outsourcing out such services to external business processing businesses.

b) Accept or Reject Decision of Special Orders - This type of decision is frequently

made when a firm receives a unique one-time order from a potential client at a
lower selling price than the company's typical selling price. A one-time order that
is not regarded part of the company's regular ongoing business and is not expected
to reoccur and be part of the normal operating cycle is referred to as a special
order.

c) Dropping or Maintaining a Business Segment which can also include temporary

shut-down decisions - This issue occurs when a specific segment, a product line, a
branch, or a business unit appears to be losing money, and management wants to
know whether it is still worthwhile to keep the segment open and operational or if
the organization would be better off without it. The standard approach and the
opportunity approach are two techniques to analyze this type of decision.

d) Sell or Process Further after the joint processing - This is a circumstance in which
management must choose between selling the items at split-off or incurring
additional costs beyond split-off (known as separable cost) and then selling the
goods at a higher price. This occurs in a manufacturing setting where a joint
production process is used, which is the outcome of combining the creation of two
or more products, known as joint products.

e) Addressing Limited Capacity Problems - When there is a constraint, this

condition occurs. Any limits that a firm must work under, such as limited
available direct labor, machine time, or raw resources, which restricts the
organization's ability to supply demand, is referred to as a constraint or a
bottleneck. By limiting the total output of the entire system, a constraint or
bottleneck inhibits a company's potential to grow. The usage of limited worker
hours, materials, and machine time could all contribute to a limited capacity
dilemma.

References:
Agamata, F. (2019). Management Services: A comprehensive guide. (2019 Edition A
Comprehensive Guide). GIC Enterprises & Co., Inc.

PDF Coffee article uploaded by: Raraj. Module 6: Non-Routine Decision Making. Retrieved
from: https://pdfcoffee.com/download/module-6-differential-costing-pdf-free.html