The chapter starts our study of decision making. One of the key concepts to decision making is the relevant cost. Make sure you understand what a relevant cost is because this idea is the foundation for everything else in this chapter. There are a number of specific decision-maiking situations covered in this chapter but in order to solve ALL of them you must understand the concept of relevant cost.

After you review the chapter, review the questions below:

1) Why is an opportunity cost sometimes a key factor in a make or buy decision?

2) When we have a constrained resource - how do we decide which products to produce first?