Management and Organizational Studies 1023A/B Lecture Notes - Lecture 4: About The Money, Management Accounting, Opportunity Cost

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

Document Summary

Help internal users make decisions (not external users) Step 1 specify the decision problem, including the decision maker"s goals. Be clear on what your goal is: goals vary across individuals. Money, leisure, risk, fame, : e ective decisions require that we. Understand the factors that in uence goals and their relative importance. Step 2 identify options: decisions vary in number of available options, critical for management to identify best options for analysis. Step 3 measure bene ts (advantages) and costs (disadvantages) to determine the value (bene ts reaped less costs incurred) of each option. Analyzing options - numbers: value = bene ts less costs. Usually decisions are made to achieve the highest value. Weigh the bene ts: **** opportunity cost = value of next best option. A decision gives up something to get something: role for accounting. Step 4 make the decision, choosing the option with the highest value. Four step framework for decision making in organizations: