Management and Organizational Studies 1023A/B Lecture Notes - Lecture 12: Opportunity Cost, Flight Controller, Mystery Shopping

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 1023A/B
• Professor: Barry Hawn

Document Summary

Accounting information for decision: the decision framework goes as follows;- Making: specify the decision problem, including the decision makers goals. It is necessary to know the objective or goal before making the decision so that the decision could help in satisfying the goal. Managers distinguish themselves by their ability to make the most promising options: measure beneits and costs and choose (beneit>cost) option. Value is the contribution of an option to the decision maker"s goals. (we measure value according to the status quo, which is not doing anything at all. For example if your goal of going to montreal is maximizing time there- take light or if the goal is minimizing travelling costs- then drive. Opportunity cost of any decision is the value to the decision maker of the next best option. Businesses measure value and opportunity cost in terms of money or proit. Efective decision makers make sure that the value of the chosen decision option exceeds opportunity cost.