ACCTG 102 Lecture Notes - Lecture 13: Sunk Costs, In Step, Opportunity Cost
Document Summary
The decision making process making decisions is an important part of management. Accounting gets involved in step 2 because for each course of action need revenue and cost data. In step 4 internal reports are prepared that review actual impact of a decision. In decision making usually review financial and nonfinancial information. Nonfinancial info relates to factors such as the effect of the decision on employee turnover, the environment or image of company. Financial revenue/cost and effect on overall profitability. If deciding to buy or lease computer, have to compare costs of one to the other. The financial data relevant to the decision is the data that would vary in the future among possible alternatives. The process of identifying data that changes under alternatives = incremental analysis. Involves identifying relevant revenue/costs as well as determining probable effects of decisions on future earnings. Basic approach is to compare alternative a to b.
