Acc Ch.20

Question 1

Management decision making

Answer 1

1) ID the problem
2) determine and evaluate courses of action
3) make a decision
4) review results

Question 2

Incremental analysis

Answer 2

Process of ID the financial data that changes under alternative courses of action

Question 3

Relevant costs

Answer 3

Only factors to be considered are those costs that differ across alternatives

Question 4

Sunk costs

Answer 4

Is a cost resulting from a past decision and cannot be changed or avoided and is irrelevant to future decisions

Question 5

Out of pocket costs

Answer 5

Costs that require future outlay of cash and is relevant for current/future decisions

Question 6

Opportunity cost

Answer 6

The potential benefit lost by taking a specific action where 2 or more alternatives are available