Question

Please explain to the best of your knowledge one or more of the following

1- Screening decisions

2- Preference decisions

3- Least Cost Decisions

Answer 1

1. Screening Decisions:

Basically this relates to whether a project that is proposed meets certain acceptance standards. Say for example, a company have a strick policy of accepting a proposed project only if it meets the pre-determined criteria of satisfying the required rate of return, otherwise the project is not acceptable by the company.

2. Preference decisions:

Preference decisions involves selecting one from among several competing courses of action. To illustrate, a firm may be considering several different machines to replace an existing machine on the assembly line. The choice of which machine to purchase is a preference decisions.

Apart from the above two types of decisions, we also have something called Least Cost Decision when no revenues are involved.

In this type of Decision, the most desirable alternative will be the one that promises the least total cost from the present value perspective.