Chapter 11 - Decision Making and Relevant Information

Chapter 11 - Decision Making and Relevant Information -...

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Chapter 11 – Decision Making and Relevant Information I. Information and the Decision Process a. Decision Model: i. Formal method of making a choice, and it often involves both quantitative and qualitative analyses II. The Concept of Relevance a. Relevant Costs and Relevant Revenues: i. Relevant costs: 1. Expected future costs that differ among the alternative courses of action being considered ii. Relevant Revenues: 1. Expected future revenues that differ among the alternative courses of action being considered iii. These costs and revenues must: 1. Occur in the future 2. Differ among the alternative courses of actions iv. Sunk Costs: 1. Past costs that are unavoidable and cannot be changed no matter what action is taken b. Qualitative and Quantitative Relevant Information i. Quantitative Factors: 1. Outcomes that are measured in numerical terms ii. Qualitative Factors: 1. Outcomes that are difficult to measure accurately in numerical terms a. Example, employee morale III. Choosing Output Levels a. One-Time-Only Special Orders:
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i. One type of decision that affects output levels is accepting or rejecting
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This note was uploaded on 04/24/2011 for the course MGMT 505 taught by Professor Staff during the Spring '08 term at Purdue University-West Lafayette.

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Chapter 11 - Decision Making and Relevant Information -...

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