Question

In 150 words or fewer, explain the difference between relevant costs, irrelevant costs, and sunk costs.

In 150 words or fewer, explain the difference between relevant costs, irrelevant costs, and sunk costs.

Homework Answers

Answer #1

Relevant Costs

Relevant costs are those costs that are pertinent to the decision on hand.They are used in decision making by the management.They are used to eliminate unnecessary data and aid in decision making. Examples of situation where relevant cost is used

Determining to continue or eliminate a product

Make vs Buy decisions

Accepting a special order

Irrrelevant Costs

They are the costs that will not change as a result of management decision. example Depreciation, Rent, Salary

Sunk Costs

These are costs which are incurred in past and cannot be recovered.They are considered as irrelevant in decision making. Example purchase price of materials or equipment bought.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Describe sunk costs. Why are sunk costs irrelevant in decision making? Give an example of a...
Describe sunk costs. Why are sunk costs irrelevant in decision making? Give an example of a fixed cost that is not sunk, but is still irrelevant.
Explain what a sunk cost is. Are sunk costs relevant in decision making? Why or why...
Explain what a sunk cost is. Are sunk costs relevant in decision making? Why or why not?
Are sunk costs irrelevant when considering two mutually exclusive future opportunities? Explain your answer.
Are sunk costs irrelevant when considering two mutually exclusive future opportunities? Explain your answer.
Costs that are different under alternative choices are called? a. Irrelevant costs b. Sunk costs c....
Costs that are different under alternative choices are called? a. Irrelevant costs b. Sunk costs c. Manufacturing costs d. incremental costs
Which of the following costs are always irrelevant in decision making? A. sunk costs B. opportunity...
Which of the following costs are always irrelevant in decision making? A. sunk costs B. opportunity costs C. fixed costs D. avoidable costs
In a replacement analysis, irrelevant past costs are known as sunk cost. True or false
In a replacement analysis, irrelevant past costs are known as sunk cost. True or false
Sunk or opportunity cost Explain the difference between a sunk cost and an opportunity cost and...
Sunk or opportunity cost Explain the difference between a sunk cost and an opportunity cost and give an example of each.
Are sunk cost always irrelevant in incremental analysis? Explain your answer and use examples.
Are sunk cost always irrelevant in incremental analysis? Explain your answer and use examples.
We are told that in capital Budgeting Analysis, sunk costs are irrelevant. If the firm spent...
We are told that in capital Budgeting Analysis, sunk costs are irrelevant. If the firm spent resources for the asset, should it not be able to recover these costs from the project? The IRR is very intuitive to understand. Why is it not superior to the NPV in Capital Budgeting Analysis?
1. Why are sunk costs relevant in decision making? Explain 2. What are the factors that...
1. Why are sunk costs relevant in decision making? Explain 2. What are the factors that make a cost or revenue item relevant? Have you been in a situation where you needed to make this distinction? If so, how did you determine relevancy?