AFM123 Lecture Notes - Lecture 7: Worth It, Opportunity Cost, Fixed Cost

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM123
• Professor: Peter Blake

Document Summary

Focus on managers and the information they need to run their business successfully (sales managers, production managers, etc) Emphasis is on the results of past. Prescribed financial information (example: canada revenue agency) future decisions. Focus is on profitability you need to make money. Control: actual results vs. budgeted, analyze profitability, prepare performance report, make decisions (run the numbers and compare the impact on profitability) Focus of managerial is = cost concepts. Make money = revenue - cost: trying to understand it better. We"re talking about a service - it"s just labour. Fixed costs: cost where the total dollar amount stays fixed regardless of changes in level of activity (over a relevant range) ex. rent, utilities, depreciation (straight line), supervisor salaries. > misleading to state fixed costs on a per unit basis - it will lead you to the wrong decisions in the long run. Why? because they don"t change with changes in activity level.