Differential cost is the difference in cost between two alternatives. 2) Decision making
Differential cost is the difference in cost between two alternatives.
2) Decision making is guided only by differential costs.
3) Irrelevant factors should be considered when making decisions.
4) You are trying to decide whether or not to sell back your accounting textbook at the end of the class. The cost you paid for the book is relevant to your decision.
5) Sunk costs are a major part of the decision making process.
6) ________ information is that which differs between alternatives and can affect the future.
7) Which of the following represents a sunk cost?
A) A historical cost that is never relevant
B) A historical cost that is always relevant
C) An outlay expected to be incurred in the future
D) A cost that is relevant to any decision
8) Subtracting the costs of one alternative from the costs of the other alternative would be called the ________ cost.
9) When deciding to buy a new computer, all of the following should be considered EXCEPT for the:
A) cost of the new computer.
B) cost of the old computer.
C) games that come with the new computer.
D) warranty on the new computer.
10) When making a decision to buy a new computer, all of the following should be considered EXCEPT for:
A) differential costs.
B) relevant costs.
C) qualitative characteristics.
D) sunk costs