AFM102February162011

AFM102February162011 - Introduction to Management...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Introduction to Management Accounting AFM 102 February 16, 2011 Introduction to Relevant Costs 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Key Concepts in Today’s Class Relevant Cost Sunk Costs The make or buy decision 2
Background image of page 2
Relevant Cost A relevant cost is a cost or revenue that changes as a result of a decision We say that the change is relevant to making that decision 3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Relevant Costs and Going to a Movie Relevant Admission price Transportation if any Required food and beverages Alternative sacrificed 4
Background image of page 4
Sunk Cost A sunk cost is a past cost and therefore does not meet the definition of a relevant cost Examples of sunk costs Depreciation on machinery Purchase price of stock 5
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
However People consistently behave in a way that reflects sunk costs affect their behaviour “The sunk cost effect is a maladaptive economic behavior that is manifested in a greater tendency to continue an endeavor once an investment in money, effort, or time has been made… young children, when placed in an economic situation akin to a sunk cost one, exhibit more normatively correct behavior than do adults.” 6
Background image of page 6
Concorde Effect 7 “Beginning in the 1960s, the French and British governments
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 05/11/2011 for the course AFM 102 taught by Professor R.ducharme during the Spring '09 term at Waterloo.

Page1 / 13

AFM102February162011 - Introduction to Management...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online