RECOGNITION OF OPPORTUNITY COST AND RELEVANT COST: A TOOL FOR EFFECTIVE BUSINESS DECISION MAKING BY IWUCHUKWU UCHENNA IWUAKU O9AA08549 ACCOUNTING 300L LECTURER: MRS OBIGBEMI INTRODUCTION The role of opportunity cost and relevant cost cannot be overemphasized in the making effective decision making. They work hand in hand in making sure that the company makes the best economic decision‚ they are both used in making managerial decisions at every level of planning and decision making. To buttress my point
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good step that provides insights into behaviour help people understand themselves as well as understanding other people that they are in daily contact with‚ so that they can find a way to making things work properly. The MBTI measures four preferences: Focus of attention‚ Acquiring information Making decisions‚ and External orientation.In my opinion this test is a very important step if you were in a position to select a team members or if you were a project manager and you want to select your
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for an order for 2‚500 units of GX1. The company only makes GX1 to order and currently has no other orders in process. The production requirements for GX1 are as follows: Materials: Three types of material are used in production: Amount Cost Resale Current used per unit price value price to buy Material A 12kg £2.50 £1.00 £2.75 Material B 4kg £7.00 £5.50 £8.50 Material C 6kg - £6.50 - Material A is used extensively throughout the company’s range of products
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RELEVANT AND IRRELEVANT INFORMATION 1. It is easy to understand why Mrs. Smith is always so busy between 5:45 and 7:45 in the evening. At about 5:45 she has to start cooking because Mr. Smith gets home from work at 6:30 and wants his dinner soon after he arrives. At the same time she has to keep an eye on her two sons to see that they do their homework. At 6:15 it is time for the baby to be fed‚ bathed‚ and then put to bed. The two boys have to be ready for bed at about 7:15‚ and if Mrs. Smith does
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Cost and Revenue Curves J Bara ECO/533 Economics for Managerial Decision Making PA04MBA10 April 7‚ 2005 1. Total profit is the product of profit per unit and the quantity. To maximize profit‚ quantity is chosen at the point where marginal cost (MR) is equal to marginal revenue (MR) which is where the two graphs intersect. This is the ideal situation to a profit seeking company. Since price is greater than the Average Total Cost (ATC)‚ for each unit sold the profit per unit is simply the
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Agency Costs and Financial Decision-Making The Concept An agency relationship is a contract under which one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf which involves delegating some decision making authority to the agent. If both parties to the relationship are utility maximizers and they may have divergent goals and objectives‚ and there is good reason to believe that the agent will not always act in the best interests of the
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Relevant Costs Defined Relevant costs possess two characteristics: (1) They are future costs and (2) They differ across alternatives. All pending decisions relate to the future; accordingly‚ only future costs can be relevant to decisions. However‚ to be relevant‚ a cost must not only be a future cost but must also differ from one alternative to another. If a future cost is the same for more than one alternative‚ then it has no effect on the decision. Such a cost is irrelevant. The
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A2 Markets & Market Systems Short Run and Long Run Production | | As part of our introduction to the theory of the firm‚ we first consider the nature of production of different goods and services in the short and long run. The concept of a production functionThe production function is a mathematical expression which relates the quantity of factor inputs to the quantity of outputs that result. We make use of three measures of production / productivity. * Total product is simply the total
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Chapter 11 – Decision Making What is Decision Making? * Decision making – the process of developing a commitment to some course of action * Can also be described as a process of problem solving * Problem – a perceived gap between an existing state and a desired state Well-Structured Problems * Well-structured problems – a problem for which the existing state is clear‚ the desired state is clear‚ and how to get from one state to the other is fairly obvious * Decision making takes time
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1. What is Decision Making? Decision-making is an essential aspect of modern management. It is a primary function of management. A manager’s major job is sound/rational decision-making. He takes hundreds of decisions consciously and subconsciously. Decision-making is the key part of manager’s activities. Decisions are important as they determine both managerial and organizational actions. A decision may be defined as "a course of action which is consciously chosen from among a set of alternatives
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