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Mizzou ACCTCY 2037 - Short Term Decision Making

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Short term decisionsAssumes current capacity is fixed since in the short term, a company cannot increase its physical capacityThe decisions are not planned out.They should be unique decisions, each decision must be analyzed as a distinct opportunityThings to Consider with short-term decisions:Future costs and revenuesWhat will change as a result of the decisionCurrent costs for activities that are not necessary to carry out decision are not relevantPast or “sunk” costs are not relevantIncremental Costs: cost increases resulting from performance of an additional activityAvoidable Costs: the cost that must be incurred to preform an activity at a given level, but can be avoided if that activity is stopped or reducedSunk Costs: are past costs incurred by the company (not relevant)Opportunity Costs: forgone benefits of the next best alternativeACCY 2037 1st Edition Lecture 3 Outline of Current Lecture II. Short Term Decisionsa. Things to Consider with Short term DecisionsCurrent Lecture Chapter 14 Short term decisions- Assumes current capacity is fixed since in the short term, a company cannot increaseits physical capacity- The decisions are not planned out.- They should be unique decisions, each decision must be analyzed as a distinct opportunityThings to Consider with short-term decisions:- Future costs and revenues- What will change as a result of the decision- Current costs for activities that are not necessary to carry out decision are not relevant- Past or “sunk” costs are not relevant Incremental Costs: cost increases resulting from performance of an additional activity Avoidable Costs: the cost that must be incurred to preform an activity at a given level, but can be avoided if that activity is stopped or reduced Sunk Costs: are past costs incurred by the company (not relevant) Opportunity Costs: forgone benefits of the next best alternativeThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a


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