ECON1013 Lecture Notes - Lecture 1: Insourcing, Opportunity Cost, Sunk Costs
Document Summary
Management accounting decision model: a formal method for making a choice, frequently involving quantitive and qualitative analyses. 5 step process: step 1: gathering information, step 2: making predictions, step 3: choosing an alternative, step 4: implementing the decision, step 5: evaluating performance. Relevant costs: those expected future costs that differ among alternative courses of action. Relevant revenues: those expected future revenues that differ among alternative courses of action. Differential cost: the difference in total cost between two alternatives quantitative factors: outcomes that are measured in numerical terms (financial or non-financial) qualitative factors: outcomes that cannot be measured in numerical terms. But just because qualitative factors and non-financial quantitative factors cannot be easily measured in financial terms does not make them unimportant! One-off special offers: managers sometimes face the decision of accepting or rejecting one-off special orders when there is idle production capacity and where the order has no long-run implications.
