MGMT 122 Lecture Notes - Lecture 5: Cost Driver, Fixed Cost, Variable Cost
Document Summary
Make sure you fully understand the economic environment: understand my product and its capabilities, understand the competitors, understand the consumer, understand where the economy is going. Identify the precise nature of the decision: a lot of decisions have repercussions that reach much further than you expect. Identify your objectives: we want to know what we are trying to maximize, always trying to maximize the profit of our business, cutting cost will not always increase profit. Identify the economic effects of your decision: need to know the exact slope of the curves. Make sure you"ve seen the intangible as well as the tangible effects of the decision: don"t ignore the intangible! Aggregate all of the effects and determine the choice that maximizes the objective. Make sure you"ve answered the question that needs answering: sometimes you get completely off track and end up answering something completely else.
