Chapter 11
Making Smart Business Decisions with Relevant Information
In This Chapter
Understanding relevance in making decisions
Distinguishing between relevant and irrelevant information
Thinking about opportunity costs
Taking on special orders
Finding the optimal product mix
A business owner makes decisions every day, some with far-reaching consequences. This chapter describes the decision model, the use of relevant information, and some choices that business owners may face.
In business, making a decision usually means cutting off one option and going with another. (Serendipitously, the word decision comes from the Latin word decidere, and it literally means “to cut off.”)
In cost accounting, relevance means “connected to the matter at hand” (as it also does in real life). It’s critical to focus on the most important data.
Your job is to define problems and determine which information (accounts, activities, costs) is most important. Then you decide what to do.
In this chapter, ...
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