ACC-1B Chapter Notes - Chapter 7: Training Wheels, Sunk Costs, Opportunity Cost
Document Summary
Decision making process : identify the problem and assign responsibility, determine and evaluate possible course of action, make a decision, review results of the decision. Process used to identify the financial data that change under alternative course of action. Both costs and revenues may vary or only revenues may vary or only costs may vary. Important concepts: relevant cost, opportunity cost, sunk cost. Sunk cost a cost that cannot be changed by any present or future decision. Incremental analysis process of identifying the financial data that change under alternative course of action. Opportunity cost potential benefit that may be lost from following an alternative course of action. In a decision on whether an order should be accepted at a special price when there is plant capacity available, a major consideration is whether the special price exceeds variable or incremental costs.
