ACCTG 211 Chapter Notes - Chapter 8: Offshoring, Opportunity Cost, Target Costing
Document Summary
Chapter 8 relevant costs for short-term decisions. How do managers make decisions: define business goals, identify alternative courses of action, gather and analyze relevant information: compare alternatives, choose the best alternative, implement decision, follow-up: compare actual results with the results anticipated. Relevant information: is expected future data: differs among alternatives. Irrelevant costs are costs that do not affect your decision: because these costs do no differ, they do not affect your decision. Sunk costs are also irrelevant to your decision because they are costs that were incurred in the past and cannot be changed regardless of which future action is taken. Relevant qualitative information has the same characteristics as relevant financial information: the qualitative factor occurs in the future and it differs between alternatives. A special order occurs when a customer requests a one-time order at a reduced sales price.