Question

1. What is a Sunk costs and how relevant is this cost in a decision-making.?

2. What is Opportunity costs and how relevant is this in making a decision.?

3. Excess or unused capacity are key element in a decision to accept or reject a special offer price on a product or activity what is your understanding of this concept.?

4. What is the different between avoidable and unavoidable cost?

5. Quantitative factors vs Qualitative factors, how useful are these two factors in decision making and what is the differences?

6. In a case of make-or-buy decision when there is an alternative uses for capacity, what is the significant of the opportunity cost in the decision of either to make or buy?

7. What is Cost Function? And how it can be used to calculate total cost

8. What is the most important assumption frequently made in cost behavior estimation?

9. What is Mixed Costs and how can this cost be separated?

10. When replacing an old machine with a new machine, how relevant is the trade in value of the old machine?

11. For a cost or revenue to be relevant in decision making, what are the condition that must be met

12. What is the relationship of both variable and Fixed Costs to output or activity level?

13. What is a learning curve, and what does it measures?

14. What is experience curve and how does it relates to cost per unit?

15. What are the fundamental different between absorption and marginal costing? Who are the users of both?

16. If an unprofitable segment is eliminated, what will happen to the allocated fixed cost?

17. Under high-low method, the denominator of the equation that determines the slope is?

Answer 1

1)	A sunk cost is a cost that cannot be changed or recovered .A sunk cost is independent of all the future costs of a business incur. Since decision-making only affects the future course of business .Sunk costs is irrelevant in the decision-making process because Sunk costs doesnot affect the future course of the business.
2)	Opportunity cost is the value (i.e cost) or benefit that must be given up to achieve or acquire something else. Opportunity costs is dependent in the decision-making process because Opportunity costs affect the future course of the business since every resources can be put to alternate purpose
3)	Excess or unused capacity are key element in a decision to accept or reject a special offer price on a product or activity. Excess capacity is utilized when the special offer price is greater than the variable manufacturing cost thereby bringing in additional income. Excess capacity is not utilized when the special offer price is less than the variable manufacturing cost because it will create an additional cost which is excess of the variable manufacturing cost over the Special price.
4)	Avoidable Costs are the cost which can be avoided. It is incurred dependent on a decision taken on a production or investment. Avoidable costs are variable. Example. Labour costs, raw material etc. Unavoidable Costs are the cost which cannot be avoided. It is incurred independent on a decision taken on a production or investment. Unavoidable costs are fixed. Example: Administrative workforce and tools, require an initial investment .