Explain a situation you have observed (or read about) in which a firm made a decision considering irrelevant costs or did not consider relevant costs. What was the outcome of the decision, and what could have been done differently?
Here’s an example of a firm making a decision based on irrelevant costs and neglecting relevant ones:
Case Study: Airline Adds In-Flight Meals
Lesson Learned:
This example highlights the importance of focusing on relevant costs that directly impact a decision’s outcome. Sunk costs should not be the primary driver, and a thorough understanding of customer preferences and operational implications is crucial for making sound business decisions.