8.1 Review - Differential Costs, Sunk Costs, and Decision Making
For a cost to be a differential cost, it must be:
A future cost that changes
In a decision regarding whether or not to buy a new truck, the book value of the old truck usually is considered to be:
A sunk cost
Which of the following statements is true when making product and process decisions?
Both quantitative and qualitative factors should be considered
The total-cost approach to considering alternatives includes analyzing:
Both the common and the differential costs of the alternatives
For which decision would a store manager's salary be a differential cost?
Closing the store
Which of the following costs is least likely to be a differential cost?
Depreciation
Costs that can be eliminated in whole or in part by choosing one alternative over another are:
Differential costs
Future costs that change as a result of a decision are:
Differential costs
For which decision(s) would shipping costs be a differential cost?
Increasing the product's sales
Which of the following is true when making product and process decisions?
Only the differential costs should be used to make a decision.
The total-cost approach to pricing products is usually relevant to:
Only the pricing of normal orders for products
A cost that is measured by the benefits forgone from an alternative use of resources is called a(n):
Opportunity cost
Costs that are significant in the decision-making process but are NOT recorded in the accounting records are:
Opportunity costs
The maximum available contributions to profit that have been passed up by using resources for another purpose are:
Opportunity costs
Which of the following costs are always relevant for decision making?
Opportunity costs and differential costs
Costs that are never relevant to a decision because they are always the same are:
Sunk costs
Costs that have already been incurred and cannot be avoided are:
Sunk costs
Evening theater tickets are probably more expensive than matinee tickets because:
Theaters are trying to use up excess capacity and so are considering only incremental costs in determining the price of a matinee
Differential costs are relevant when making which of the following types of decisions?
~The pricing of special orders ~When to drop or add a product ~Determining whether or not to further process different products ALL OF THESE ARE CORRECT
