Financial Accounting > EXAM REVIEW > Final Exam Study Topics Chapter 1: Accounting: Information for Decision Making (All)

Final Exam Study Topics Chapter 1: Accounting: Information for Decision Making

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Describe the four-step framework for decision making • Step 1: Specify the decision problem, including the decision maker’s goals. • Step 2: Identify Options • Step 3: Measure benefits and ... costs to determine the value of each option o Opportunity Cost: Value of the next best alternative • Step 4: Make the Decision – Option with Highest Value Compare individual and organizational decision making • Individual Goals might differ from Organization goals, leading to actions that are not in the firm’s best interest. Individual goals might have several factors • Organizational Goals o Group of individuals engaged in a collectively beneficial mission o More focused goals – (Usually to maximize profit) o Example: Public company, owned by shareholders, goal is to maximize shareholder value Relate planning and control decisions to the four stages of the PIER cycle • Planning Decisions o Choices about acquiring and using resource to deliver products and services to customers o Specifies actions required to achieve a goal o Examining the future decisions • Control Decisions o Motivating, Monitoring, and evaluation performance o Examining Past decisions • PIER Cycle: Planning and Control Cycle – Plan, Implement, Evaluate, and Revise o Can happen in seconds or a months [Show More]

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