RSM322H1 Lecture Notes - Lecture 2: Sunk Costs, Cost Driver, Marginal Cost

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8 Mar 2017
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Opportunity set: set of alternative actions available to decision maker. Opportunity cost: benefits forgone by choosing one alternative from the opportunity set rather than the best non-selected alternative. Rely on historical costs of resources actually expended. Sunk costs: costs which were incurred in the past and cannot be changed no matter what future action is taken. Sunk costs are totally irrelevant for decision making and are excluded from opportunity costs. Sunk costs might be useful for control purposes. Ofte(cid:374) the ter(cid:373) (cid:862)rele(cid:448)a(cid:374)t (cid:272)ost(cid:863) des(cid:272)ri(cid:271)ed as (cid:862)e(cid:454)pe(cid:272)ted future (cid:272)osts that (cid:449)ill differ u(cid:374)der alternati(cid:448)es. (cid:863) Opportunity costs is a well-defined, fundamental concept in economics that e(cid:374)(cid:272)o(cid:373)passes (cid:862)rele(cid:448)a(cid:374)t (cid:272)ost. (cid:863) Thus o(cid:374)l(cid:455) (cid:862)opportu(cid:374)it(cid:455) (cid:272)ost(cid:863) (cid:449)ill (cid:271)e used i(cid:374) the te(cid:454)t. The costs of sox the sarbanes-oxley act of 2002. The public company accounting reform and investor protection act. Direct costs of compliance expected to grow to billion in 2005.

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