Discussion Board 8: The Decision Model As A Cognitive Template (Coursework Sample)

DISCUSSION BOARD 8
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Introduction
The decision model is a cognitive template meant to realize, organize and manage the logic behind any decisions affecting business. Therefore, this warrants a manager to come up with a well informed and educated decision regarding a business operation. The sole purpose of any business is maximizing output and minimizing its inputs. As a result, managers struggle with the decision on how to increase earnings while keeping costs to a minimum. Therefore, it's important that these alternatives stay in check. It is right that managers should select the option that increases earnings or reduces the cost for the reasons discussed below.
Reduced cost of production
The production cost consists of two elements, fixed and marginal cost. Fixed costs are those cost of production that are constant, do not vary with production volume and they are uncontrollable. Marginal cost depends on the managers since they tend to vary with the production volume. The managers can control marginal cost and should be able to know where the volume of production cost is lowest (DRURY, 2013). Therefore the lower the marginal cost, the lower the production cost and thus the higher the net profit since the fixed cost remain constant.
Increased operating income
Operating income (earnings) = total revenue - production cost. Therefore total revenue must be increased to increase operating income. As sales increase, there is an increase in the cost of production increases too. Therefore the managers should increase production, but they should choose the right capacity that optimizes on production cost (Enqvist, 2014).
Conclusion
Businesses are meant to fill a gap in the economy by m...