COMMERCE 2AB3 Chapter 7: Chapter 7 Textbook

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 2AB3
• Professor: Khalid Nainar

Document Summary

Financial information is about revenues and costs and their effect o(cid:374) the co(cid:373)pa(cid:374)y"s overall profitability. Non-financial information is about such factors as the effect of the decision on employee turnover, the e(cid:374)viro(cid:374)(cid:373)e(cid:374)t, or the co(cid:373)pa(cid:374)y"s overall i(cid:373)age i(cid:374) the co(cid:373)(cid:373)u(cid:374)ity. Incremental analysis (differential analysis): the process of identifying the financial data that change under alternative courses of action. Relevant costs: those costs and revenues that differ across alternatives. Opportunity cost: the potential benefit that may be lost from following an alternative course of action. Sunk costs: costs that cannot be changed by any present or future decision: accept an order at a special price, make or buy. Opportunity cost: is the potential benefit that a company may lose by following an alternative course of action: sell or process further. Process further as long as the incremental revenue from the processing is more than the incremental processing costs.