COMMERCE 2AB3 Chapter Notes - Chapter 7: Sunk Costs, Opportunity Cost

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 2AB3
• Professor: Aadil Merali Juma

Document Summary

However, management"s decision- making process does not always follow the same pattern, because decisions vary significantly in their scope, urgency, and importance. In making business decisions, management ordinarily considers both financial and non-financial information. Financial information is about revenues and costs and their effect on the company"s overall profitability. Non-financial information is about such factors as the effect of the decision on employee turnover, the environment, or the company"s overall image in the community. Incremental analysis identify the financial expenses from alternate courses of action. Relevant cost in incremental analysis, the only factors to be considered are (1) those costs and revenues that are different for each alternative (2) those costs and revenues that will occur in the future. Costs and revenues that do not differ across alternatives and will not occur in the future can be ignored when trying to choose between alternatives.