VCM: PRELIM SUMMARY QUIZ

The kind of cost that can be ignored in a short-term decision making is a(an)

• differential cost

• incremental cost

• sunk cost

• joint cost

What is the first step in the decision making process?

• Specify the criteria by which the decision is to be made.

• Consider the strategic issues regarding the decision context.

• Perform an analysis in which the relevant information is developed and analyzed.

• Compare the alternatives.

Sunk costs are

• Costs that increase due to a higher volume of activity or the performance of an additional activity

• Costs that a company must incur to perform an activity at a given level, but will not be incurred if a company reduces or discontinues the activity

• The profits that a company forgoes by following a particular course of action

• Costs that were incurred prior to making a decision

A sunk cost is:

• a cost incurred in the past and not relevant to any future course of action.

• an opportunity cost.

• useful in analysis of alternative courses of action.

• relevant to current decision making.

The difference in cost between or among various alternative courses of action appropriately describes a(an):

• differential cost

• constraint

• adhoc discount

• scarce resource

An important concept in decision making is described as “the contribution to income that is forgone by not using a limited resource in its best alternative use.” This concept is called

• Marginal cost

• Cost outlay

• Incremental cost

• Opportunity cost

An “opportunity cost” is

• the difference in total costs that results from selecting one alternative instead of another

• the profit forgone by selecting one alternative instead of another

• a cost that may be saved by not adopting an alternative

• a cost that may be shifted to the future with little or no effect on current operations

The potential benefit that may be obtained from following an alternative course of action is called

• opportunity benefit

• relevant cost

• opportunity cost

• sunk cost

Opportunity costs are

• Costs that increase due to a higher volume of activity or the performance of an additional activity

• Costs that a company must incur to perform an activity at a given level, but will not be incurred if a company reduces or discontinues the activity

• The profits that a company forgoes by following a particular course of action

• Costs that were incurred prior to making a decision

A fixed cost is relevant if it is

• future cost

• sunk

• avoidable

• a product cost