Cost Relevance

Question 1

What are relevant costs and benefits?

Answer 1

Future costs and benefits that differ from alternatives

Question 2

What are avoidable costs?

Answer 2

Those that can be eliminated by choosing one alternative over the other; they are always considered relevant

Question 3

What are unavoidable costs?

Answer 3

Those that cannot be eliminated are are irrelevant to decision making

Question 4

What are the two types of irrelevant costs?

Answer 4

Suck cost- Cost has already been incurred and cannot be changed

Future costs that don’t differ

Question 5

What is accounting costs?

Answer 5

Costs that can be found in the fundamental books of record (e.g. general ledger).

They are usually not relevant in making a decision

Question 6

What are opportunity costs?

Answer 6

The benefit forgone that results from choosing one alternative course of action rather than another

Question 7

Are fixed costs equivalent to unavoidable costs?

Answer 7

False.

cannot be changed

Question 8

What is marginal cost?

Answer 8

The cost of producing one more unit

Question 9

What is incremental cost?

Answer 9

The difference between two decision alternatives

Question 10

When making decision to sell or process further, what is your main focus?

Answer 10

Difference between revenue that can be earned at SPLIT-OFF and the revenue that can earned after further processing