Question

describe differential cost, avoidable costs, sunk costs, and opportunity costs

Answer 1

Differential Cost :It is difference in total cost of two alternative it is also know as incremental cost generally it is used when two or more alternatives are available.

Avoidable Cost : Avoidable cost are that amount which can be avoided and which is not necessary to incurr for example if we had taken a factory on rent for running of machinery and now we sold the machine then now we can avoid the rent of that factory by doing that vacant.

Sunk Cost : It is a cost which is incurred but now it is not recoverable in simple word it is just like bad debt.

Opportunity Cost : It is a cost that we could earn if we do not earn what we are earning. it is loss of one alternative when we accept another alternative for example you working somewher and now you have to leave this job to join that another job then the salary that you are getting in current company is called opportunity cost.

I hope this clear your doubt.

Feel free to comment if you still have any query or need something else. I'll help asap.

Do give a thumbs up if you find this helpful.