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Decision making is a flexible action. In decision making, the manager’s judgment, intuition, mood, and personal values can also be effective. Decisionmaking problem basically involves three stages:

A good decision should have the following qualities:

Programmed (Routine) Decisions: Programmed decisions are routinely repeated decisions. Such decisions are implemented in the same way as they have been once taken. Most of the daily decisions are considered as this type of decisions. Managers don’t need to allocate time for these types of decisions. Most of the decisions taken by lower-level managers and mid-level managers are scheduled decisions. Decisions related to staff affairs or decisions related to the purchase of raw materials and supplies are examples of this type of decisions.

Non-programmed (Nonroutine) Decisions: Non-programmed decisions are special decisions that will affect the profitability of businesses in future periods. This type of decisions are often unacceptable and can not be taken as a reference. Non-programmed decisions can be taken by toplevel managers. Purchasing additional machinery to increase the capacity of the business or changing the location of the business can be given as an example for non-programmed decisions.

As cost information is used within the decisionmaking process and to measure activity, various cost information concepts have emerged. Costs for decision making can be classified as follows (ICAI, 2012: 11):

Opportunity cost is the value of benefit sacrificed in favor of an alternative course of action.

Marginal cost is the additional cost incurred when making or producing (of a good or service) one additional unit. In other words, the change in total cost that arises from the quantity changes by one unit is called marginal cost.

The sunk cost is excluded from future business decisions. Thus, it doesn’t need to be taken into consideration while decision making. In other words, all costs that do not qualify as relevant costs are called sunk costs. Main features of sunk costs are that they are not related to future decisions and they do not change between various alternatives.

Differential cost is the difference in total cost that will arise from the selection of one alternative to the other

We can list the essential factors that have a role in making a profit as follows:

The main function of cost accounting is to
produce cost information related to the production
activity of the business. The information produced
by cost accounting contributes to the following
functions:
• Determination of unit cost,
• Providing expense control,
• Planning,
• Contributing special purpose decisions.

A good decision should have the following qualities:
• Effective
• Efficient
• Practicable
• Made on time

It is possible to classify administrative decisions
into two categories as programmed (routine)
and non-programmed (nonroutine) decisions.

There are three types of decision-making conditions
• Decision making under certainty,
• Decision making under risk,
• Decision making under uncertainty

Information provided by cost accounting system
can be divided into two groups:
• cost information (related to the balance
sheet and income statement)
• management information (related to
utilization in the decision making process)

Main features of relevant cost are as follows:
• are related to future
• can be changed among the alternatives
• are affected by the decisions

Opportunity cost is the most economically
beneficial alternative which has been missed out
when choosing one alternative over another. In
other words, an opportunity cost represents the
explicit earnings from the given up alternative

Marginal cost is the additional cost incurred when making or producing (of a good or service) one 
additional unit. In other words, the change in total cost that arises from the quantity changes by one unit is called marginal cost.

Differential cost is the difference in total cost that will arise from the selection of one alternative to the other.

Total Profit (P) = Total Revenue (Sales) (TR) – Total Cost (TC)