Question

An alternative under consideration involves incurring $50 in costs to generate $60 in revenue. The differential revenue for this alternative is $10.

True

False

.Relevant costs are frequently called avoidable costs.

True

False

Cable Corporation is evaluating two decision alternatives. Alternative One has costs of $1,000 and revenues of $1,500 while Alternative Two has costs of $1,600 and revenues of $2,000. The amount of differential revenue between these alternatives is $500.

True

False

.Only variable costs are relevant for decision making.

True

False

Avoidance of product-level costs can be achieved by eliminating the product line.

True

False

Fixed costs are relevant for decision making if they vary between the alternatives and will occur in the future.

True

False

Sunk costs are not relevant for decision-making purposes.

True

False

Answer 1

Let's solve one by one

1) False , because the differential revenue is the difference between the revenue of two different alternatives ,here only one alternative is given so differential revenue cannot be calculated

2)True , because the relevant cost are avoidable while making decisions

3)True , because as said earlier it is the difference between the revenue of two different alternatives,here the revenue of two alternatives is $500($2000-$1500)

4)False, because there are also other costs which are relevant such as fixed cost

5)True , because by eliminating the product the cost related to the product can be avoided

6)True, because the relevance only occurs when it varies between the alternatives and will occur in future

7)True, because the sunk cost are the cost that cannot be recovered in future and the decision making is based upon the future costs .So in that context the sunk cost is irrelevant

Hence solved

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