Question

	9.		An important concept used in incremental analysis is:
			a.	Relevant cost and revenues.
			b.	Opportunity Cost.
			c.	Sunk Cost.
			d.	All of the above are used in incremental analysis.

Answer 1

Incremental cost analysis is very important to deciding a possible alternative.

option (a) Relevant cost and revenue do not differ while deciding any particular decision. In other words, these costs and revenue does not change while ignoring any particular alternative. Decision under incremental analysis is very much depended upon incremental cost analysis.

option (b) opportunity cost is the cost for the alternative foregone. While making decisions under incremental analysis, this cost also plays an important role in decision making process.

option (c) Sunk cost is the dead cost which is already been incurred. Already dead cost is not considered as cost under incremental analysis. Under incremental analysis, it is important to identify sunk cost. So this is considered in decision making process.

option (d) All of the above. Since all are considered while taking decisions under incremental analysis.