ACCT226 ch.13 Differential Analysis: Key to Decision-Making
Differential costs and benefits that should be considered in a decision ______.
may be qualitative or quantitative
Average costs ______.
-are often misleading -containing sunk costs
Depreciation of existing assets is relevant to decisions.
False
The first step in decision making is to ______.
define the alternatives
Costs and benefits that should be ignored when making decisions are called ______ costs and benefits.
irrelevant
Future costs and benefits that do not differ between alternatives are ______ costs to the decision-making process.
irrelevant
Costs that have no impact on future cash flows and are irrelevant to decisions are ______ costs.
sunk
Which of the following should not be included in the analysis when making a decision?
-Sunk costs -Non-differential future costs
A cost that can be eliminated by choosing one alternative over another is a(n) _______ cost.
avoidable
A future cost that is not the same between any two alternatives is known as a(n) _________, incremental, or avoidable cost.
differential
Focusing on future costs and benefits that are not the same between the choices is ______.
differential analysis
Irrelevant costs include:
-future costs that do not differ b/w alternatives -sunk costs
Some decisions have only one alternative and cannot consider steps in decision making.
False
The key to effective decision making is ______.
differential analysis
Costs and benefits that always differ between alternatives are ______ costs and benefits.
relevant
When making a decision, qualitative differences between alternatives ______ be ignored.
should not
A cost that has already been incurred and cannot be avoided regardless of what a manager decides to do is referred to as a(n) _____ cost.
sunk
An increase in cost between two alternatives is a(n) ______ cost.
incremental