ADMN 3121H Lecture Notes - Lecture 2: Historical Cost, Opportunity Cost, Fixed Cost
30 Mar 2020
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Document Summary
Chapter 11 decision making and relevant information. Learning objectives: distinguish relevant information in decision situations, contrast relevant and irrelevant costs and revenue as well as quantitative and qualitative information. Decision making in order to make the best decisions and predictions about future outcomes, accountants need reliable and relevant information. Managerial accounts must: objectively use high-quality data and analytic tools, distinguish relevant from irrelevant information recognize limitations of data quality or analytics techniques, not take impulsive actions. Often relevant information can be missing: even with the best predictions, there will be gaps between what is actualized vs. what was predicted. Uncertainty: outcomes not contemplated during the decision-making process risk: outcomes that have been contemplated, and are quantified as probabilities. Understanding which costs are relevant helps the decision maker concentrate on gathering only pertinent data, more efficient relevant cost: expected future revenues relevant revenues: expected future revenues.
