Differential Analysis

Defined as the cost that has already been incurred and that cannot be changed by any decision made now or in the future.

• Incremental cost

• Opportunity cost

• Sunk cost

• Differential cost

Future costs and benefits that do not differ between alternatives are ______ to the decision-making process.

• qualified

• relevant

• considered

• irrelevant

Sunk costs are always ______ when choosing among alternatives.

• irrelevant

• relevant

• considered

• qualified

Refers to the potential benefit that is given up when one alternative is selected over another.

• Sunk Costs

• Opportunity costs

• Relevant Benefit

• Differential Revenue

Avoidable costs (and incremental costs) are always ______ costs.

• relevant

• irrelevant

• considerable

• qualified

This decision analysis methodology is focused on identifying the relevant costs and benefits of taking alternative vs another alternative—everything else was ignored.

• sunk approach

• differential approach

• total cost approach

• incremental approach

A decision to carry out one of the activities in the value chain internally, rather than to buy externally from a supplier, is called

• opportunity decision

• crucial decision

• a make or buy decision

• tough decision

When a manager increases the capacity of the bottleneck, it is called _______ the constraint.

• sunking

• relaxing

• elevating

• differentiating

A decision as to whether a joint product should be sold at the split-off point or processed further is known as a

• sell or process further decision

• make or buy decision

• crucial decision

• go or no go decision

Refers to the benefit that should be considered when making decisions.

• Relaxing Benefit

• Relevant Benefit

• Differential Revenue

• Opportunity Benefit