acct test 2

True or false: Depreciation of existing assets is relevant to decisions.

False

True or false: Opportunity costs are not found in accounting records because they are not relevant to decisions.

False

True or false: Some decisions only have one alternative.

False

Which of the following should not be included in the analysis when making a decision?

Non-differential future costs and Sunk costs

The first step in decision making is to:

define the alternatives

Synonyms for differential costs include ______ cost.

incremental and avoidable

Costs and benefits that should be ignored when making decisions are called ______ costs and benefits.

irrelevant

The potential benefit given up when selecting one alternative over another is a(n) ________ cost.

opportunity

Differential revenue is an example of a(n) ______ benefit.

relevant

When making a decision only ______ costs and benefits should to be included in the analysis.

relevant

When planning a trip and deciding to drive your car or take the train, gasoline is a(n) ______ cost.

relevant

Costs that have already been incurred and cannot be avoided regardless of what a manager decides to do are ______ costs.

sunk

Costs that have no impact on future cash flows and are irrelevant to decisions are _____ costs.

sunk

Irrelevant costs include:

sunk costs future costs that do not differ between alternatives

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

When planning a trip and deciding whether to drive or fly, the _________ is a sunk cost and should be ignored.

original cost of the car