relevant costs - SHORT RUN ALTERNATIVE CHOICE DECISIONS...

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SHORT RUN ALTERNATIVE CHOICE DECISIONS
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SHORT RUN DECISIONS Consists of choosing among alternatives with an immediate or limited end in view – tactical but with long term consequences. Involves a period of one year or less or within the relevant range Will not require substantial investments Reversible Examples: Raise or lower selling price How to allocate capacity for a factory or space for a store to different products
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SHORT RUN DECISIONS TYPES OF DECISIONS WHERE NEEDED: Acceptance or rejection of a special order; Pricing standard products; Make or buy; Sell or process further; Add or drop a certain product line; and Utilization of scarce resources
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SHORT RUN DECISIONS STEPS IN DECISION MAKING PROCESS 1. Clarify the problem. What exactly is causing the problem or deviation? 2. Specify the criterion. Formulate the objective (MASS or SMART) 3. Identify the alternatives. Are they mutually exclusive? Is absence of an option an option by itself?
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