And that means that,
let's say we have collected someone information and then we have the choice,
either we make a decision based on this information,
or we keep collecting information.
Remember when we talked about valuation in corporate finance,
we said that we may wait for some time to be able
to collect more important information with respect to the project,
but the eternal future will still be ahead.
And oftentimes,
excluding the option-like situations when something very important happens,
and that drastically changes the overall development of the project,
we must make this choice.
So here I will put,
we keep collecting information
or we make the decision now.
So that also must be kept in line.
Now then beside this challenge,
there is something that,
let's say for the first time,
openly discusses a subtitle to this course and I will openly put
here numbers versus people.
And again, I'm putting them as versus and will
point out certain areas in which that is not only important,
but is instrumental in contributing to a potential success or a potential failure.
All right, well, first of all,
this is just an observation,
that few problems maybe resolved on the basis of numbers only.
Well, that's kind of clear because we may have a nice forecast,
we may pick everything up,
but unfortunately we cannot quantify some of
the important contributions like human behavior,
well, we can do in extent, but not fully.
So here that's sort of an absolutely trivial statement.
But then, we can say what do people do?
So people,
they contribute significantly to success or failure.
Now, we can't talk about that forever.
We can give examples why it sometimes does depend on the one crucial person,
or the overall culture in the organization, whatever.
But that is clear,
and for us, we will see that this is an issue in managerial accounting.
Because remember we talked about total costs,
we talked about relevant costs,
and we talked about responsibility accounting.
And all these openly deal with people and how they contribute.
Now this contribution of people,
so I will point out some of the ideas here that may be like intuition versus logic,
then freedom versus control.
I'm not saying that these things are absolutely opposite,
but they don't go.
Now the issue of feedback,
because remember in the managerial accounting we deal with planning,
so we did something, we controlled that,
we collected some new information and then we used feedback to fit into our plans,
or maybe revamp them completely.
Now here also, there is such a thing that's conflict of interest.
And this conflict of interest maybe both inside the company.
Let's say someone is charged with this cost and these people say,
well we have nothing to do with this cost,
so why is the charge on us,
on our a department,
on our division, on our product?
This is unfair. And here also we can say that sometimes,
I'll put it in the red, here maybe even external users involved.
Sometimes you can, by fine tuning your systems,
you can in indirect way influence the benefits of these external users.
I'm not saying that we're lying to them,
but some information may and sometimes does create this conflict of interest.
So basically, what we can say here is that in dealing with numbers and people,
ideally we would like to see that the systems that we use,
systems and approaches.
There are at least two ideas,
one is that they have to motivate rather than demotivate,
and another thing is also they must be cost effective.
And by cost effective,
I mean a very simple thing.
Let's say, we've created a really advanced system of managerial accounting,
but this creation would cost us so much that the benefits of this system,
they will be much less than the cost that was spent.
Imagine for example that you are using the system of
your personal accounting on your computer or your phone.
And again, let's say that you spend five hours a
day to work with the system to see exactly that if you paid for coffee here,
how that affects your behavior and so on and so forth.
That doesn't seem to be very efficient does it?
You might use this time for something more important.
By the same token in the company,
it's nice to have the good system that really does all the things in the right way.
But if the system is too costly both in developing and then in using,
then the question arises, do we have to use this?
This wraps up the overview of that and then what follows,
we will come closer to the idea of costs.