Management and Organizational Studies 1023A/B Chapter Notes - Chapter 3: Management Accounting, Financial Accounting, Opportunity Cost

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 1023A/B
• Professor: Christina Maco

Document Summary

Four-step framework for decision-making: specify the decision problem, including the decision maker"s goals. We all have goals, or objectives, that we strive to achieve. When determining goals their goals, individuals frequently differ in the factors they consider and the importance they attach to these factors. These difference in goals often lead to difference in choices: identify options. Some decisions involve a small number of options, for example randomly choosing a prize behind 3 doors. Some decisions have a large number of options, for example where to go on a vacation. Business decisions frequently have numerous amounts of options. Managers frequently distinguish themselves by their ability to identify the most promising options: measure benefits (advantages) and costs (disadvantages) to determine the value (benefits reaped less the cost incurred) of each option. Each option presents a unique tradeoff between benefits and costs. The value of an option equals its benefits minus its costs.