ACC 310F Chapter Notes - Chapter 1: Sunk Costs, Management Accounting, Fallacy
Document Summary
The principle of relevance helps us focus only on those costs and benefits that matter for the decision at hand to identify the best option. Role of managerial accounting is to measure costs and benefits of decision options by Then estimating the amounts of each identified cost and benefit. Principle of relevance determines which costs and benefits to consider when evaluating the various options a decision maker faces. Principle of controllability measures how long it takes to reap the net benefits from decisions. Focusing on costs and benefits that differ between two options rather than ones that they share. This principle narrows your attention to relevant costs and relevant benefits, which are costs and benefits that differ across decision options. This principle helps decision makers compare options by focusing on those costs and benefits that matter, and ignoring items that are common and irrelevent.