Satisficing, Bounded Rationality and Relapse Errors
a Group of Accounting

question 41

Essay

Satisficing, bounded rationality and relapse errors
A group of accounting students was discussing which elective courses they should take as part of their degree; several comments from their conversation appear below. Place an "X" in the appropriate column to indicate whether each comment most clearly demonstrates satisficing, bounded rationality or relapse errors. $\begin{array}{c}\begin{array}{|l|}\hline\\\\\hline \text {a. I choose classes based on the cost of the}\\ \text {textbooks they require.}\\\hline \text {b. I didn't read the book in Prof. Smith's}\\\text { class at all last semester, and I did poorly. }\\\text {But, I passed. so I'm not planning to do}\\\text { the reading next time either.}\\\hline \text {c. I know what "auditing" is, so I'm taking}\\\text { as many auditing electives as I can.}\\\hline \text {d. I prefer taking courses in the morning, so I }\\\text {don't even look at courses offered later in }\\\text {the day.}\\\hline \text {e. I took my dad's advice about my classes}\\\text { last term; even though it didn't work out}\\\text { too well. I'm planning to ask him again.}\\\hline \text {f. I'm familiar with the process of preparing }\\\text {tax returns: I'm planning to take as many}\\\text { additional tax courses as possible.}\\\hline \text {g. I'm not good at management accounting.}\\\hline \text {h. I'm taking whatever courses are offered in}\\\text { time for me to graduate.}\\\hline \text {i. I've taken forensic accounting twice and}\\\text { failed both times. But, I'm going to }\\\text {register for that class again and again until}\\\text { I pass it.}\\\hline \text {j. The easier a class is, the more likely I am}\\\text { to take it.}\\\hline\end{array}\begin{array}{l|}\hline\\\text { Satisficing }\\\hline\\\\\hline\\\\\\\\\hline\\\\\hline\\\\\\\hline\\\\\\\hline\\\\\\\hline\\\hline\\\\\hline\\\\\\\\\hline\\\\\hline\end{array}\begin{array}{l|}\hline\text {Bounded }\\\text {rationality }\\\hline\\\\\hline\\\\\\\\\hline\\\\\hline\\\\\\\hline\\\\\\\hline\\\\\\\hline\\\hline\\\\\hline\\\\\\\\\hline\\\\\hline\end{array}\begin{array}{l|}\hline\text {Relapse }\\\text {errors }\\ \hline\\\\\hline\\\\\\\\\hline\\\\\hline\\\\\\\hline\\\\\\\hline\\\\\\\hline\\\hline\\\\\hline\\\\\\\\\hline\\\\\hline\end{array}\end{array}$

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Definitions:

Direct Materials Quantity Variance

The difference between the actual quantity of direct materials used and the expected quantity, multiplied by the standard cost per unit.

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the standard cost, attributed to the difference in the hourly wage rate paid and the standard rate expected.

Direct Labor Costs

These are the salaries and wages paid to employees directly involved in producing a company's goods or services.

Controllable Variance

Controllable variance refers to the difference between actual and expected figures that can be influenced by the actions of managers.