chapter 10

Question 1

relevant costs

Answer 1

those expected future costs that differ among alternative courses of action. the two key aspects are that costs must occur in the future and that they must differ among the alternative courses of action.

Question 2

relevant revenues

Answer 2

those expected future revenues that differ among alternative courses of action.

Question 3

differential cost

Answer 3

the difference in cost between two alternatives.

Question 4

quantitative factors

Answer 4

outcomes that can be measured in numerical terms. these can be financial, so easily expressed in financial terms, or non-financial.

Question 5

qualitative factors

Answer 5

outcomes that cannot be measured in numerical terms.

Question 6

incremental costs

Answer 6

additional costs to obtain an additional quantity, over and above existing or planned quantities of a cost object.

Question 7

outsourcing

Answer 7

the process of purchasing goods and services from outside vendors rather than insourcing.

Question 8

insourcing

Answer 8

producing goods or services within the organisation.

Question 9

make-or-buy decisions

Answer 9

decisions about whether a producer of goods or services will insource or outsource. often qualitative factors dictate this decision.

Question 10

opportunity cost

Answer 10

the contribution to income that is rejected by not using a limited resource in its next-best alternative use.

Question 11

book value

Answer 11

the original cost minus total depreciation.

Question 12

sunk costs

Answer 12

past costs that are unavoidable because they cannot be changed, no matter what action is taken.