Flashcards in exam 6 Deck (16)
consists of choosing among alternatives with an immediate or limited end in view. also referred to as tactical decisions
Short run decision making
a specific set of procedures that produces a decision, can be used to structure the decision maker’s thinking and to organize the information
decision making model
Step 1. Recognize and define the problem.
Step 2. Identify alternatives as possible solutions to the problem. Eliminate
alternatives that clearly are not feasible.
Step 3. Identify the costs and benefits associated with each feasible alternative. Classify costs and benefits as relevant or irrelevant, and eliminate irrelevant ones from consideration.
Step 4. Estimate the relevant costs and benefits for each feasible alternative.
Step 5. Assess qualitative factors.
Step 6. Make the decision by selecting the alternative with the greatest overall net benefit.
Steps of the decision making model
possess two characteristics: they are future costs AND
they differ across alternatives
is the benefit sacrificed or foregone when one alternative is chosen over another.
cost that cannot be affected by any future action.
decisions involving a choice between internal and external production.
focus on whether a specially priced order should be accepted or rejected.
These orders often can be attractive, especially when the firm is operating below its maximum productive capacity.
have common processes and costs of production up to a split-off point. At that point, they become distinguishable as separately identifiable products.
The point of separation
split off point
efers to the relative amount of each product manufactured (or service provided) by a company.
product mix decisions
Every firm faces limited resources and limited demand for each product
a percentage applied to the base cost.
Companies that bid for jobs routinely base bid price on cost.
a method of determining the cost of a product or service based on the price (target price) that customers are willing to pay
nclude the process of planning, setting goals and priorities, arranging financing, and using certain criteria to select long-term assets.
capital investment decisions