Abstract

Standard teaching practice emphasizes on practical learning, where students are taught standard tools and principles for rational decision making. This study explores the significance of these sophisticated tools available for rational decision making and investigates that whether students educated to make rational decisions able to make rational judgments for real time situations. A short case was developed to assess ability of senior students to identify relevant costs. Sample consists of 398 randomly selected students from two educational institutions who had studied this concept in the course of management accounting were asked to identify the relevant costs. The results provide a dismal scene. Most students almost 97% were unable to identify all relevant costs in the case. Only 5% identified the right opportunity cost. However, 82% were able to identify the correct sunk cost. On the whole we found a below average understanding of the most of the students for the tool of relevant costing. This research put forwards the question of use fullness for application of the tools and techniques which are devised to teach people about how to make rational decisions.

Key words: Rational Decision Making, Relevant Costing, Knowledge and Application.