Relevant Costs And Revenues For Decision-making

Question 1

What is Sunk cost?

Answer 1

Cost that has been irreversibly incurred or committed and cannot therefore be considered relevant to a decision

Question 2

What is relevant costs and revenues?

Answer 2

Costs and revenues appropriate to a specific management decision

Question 3

What is incremental cost?

Answer 3

Incremental costs are the changes in future costs and revenues that occur, as a result of decisions

Question 4

What is opportunity cost?

Answer 4

The value of the benefit sacrificed when one course of action is chosen in preference to an alternative

Question 5

What is replacement cost?

Answer 5

Cost of replacing an asset

Question 6

What are non-quantifiable/qualitative factors?

Answer 6

Factors that cannot be quantified in terms of revenues and costs

These factors must be allowed to influence the decision-making process. Examples include the affect of any decision on:
Customers
Employees
Competitors
Creditors/suppliers
Legal and PR aspects