ADM 2304 Lecture Notes - Lecture 11: Sunk Costs, Watch

• School: University of Ottawa
• Department: Administration
• Course: ADM 2304
• Professor: Tony Quon

Document Summary

A relevant cost is a cost that differs between alternatives. An avoidable cost is a cost that can be eliminated, in whole or in part, by choosing one alternative over another. > two broad categories of costs that are never relevant in any decision are: sunk costs, future costs that do not differ between the alternatives. Step 1 eliminate costs and bene ts that do not differ between alternatives. Step 2 use the remaining costs and bene ts that differ between alternatives in making the decision. The costs that remain are the differential, or avoidable, costs. > note: costs that are relevant in one decision situation may not be relevant in another context. Another example . approach is desirable for two enough information be available to income statements for both costs with relevant costs may distract attention away from the really critical. Using the differential reasons: only rarely will prepare detailed alternatives, mingling irrelevant cause confusion and information that is.