Making nonroutine decisions--what cost measure is appropriate?
It would be simple if there were just one correct measure of cost. Unfortunately, every time we use cost information, the most important thing we do is determine which costs are appropriate for answering the question that has been asked. The degree of accuracy in calculating those costs will have to depend on how valuable the information is. The more important it is to have very accurate information, the more effort should be made to get such information. However, we cannot even begin the process of cost measurement until we have defined which costs to measure. In routine management, we have taken the time to refine the definition of what cost information is appropriate for the efficient running of ongoing activities. In the area of nonroutine decisions, however, everything is new. It is therefore critical for managers to spend some time thinking about which things really will change as a result of the change. Only those factors should enter into the calculation.
D003365:Costs and Cost Analysis / Q000379:methods; D003659:Decision Making, Organizational; D005377:Financial Management, Hospital / Q000379:methods*; D017721:Hospital Costs; D015397:Program Evaluation / Q000191:economics; D014481:United States