ACCT 002 Lecture Notes - Lecture 29: Outsourcing, Sunk Costs
Document Summary
Relevant costs and benefits for decision making. Costs and revenues that differ among decision alternatives. Compare to indicate how they differ under each alternative. Focus on costs that differ among decision alternatives. Organize them in a manner that clearly indicates how they differ under each alternative. Future revenues which are inflows of resources from the sale of goods or services are relevant if they differ between alternatives. Outlay costs that require future expenditures of cash or other resources are relevant if they differ between alternatives. Sunk costs are never relevant! (cost already incurred) Disposal and salvage values may be relevant. Book value of the old assets is never relevant (expected tax reduction would be relevant). Focusing on only those items that differ provides a clearer picture of the impact of the decision at hand. Because a differential analysis contains fewer items, it is easier and quicker to prepare.