Question

When using differential analysis to make a decision, a manager should look at all costs including costs spent in previous years on the subject at hand.

Group of answer choices

A) True

B) False

Answer 1

Answer : False

Differential analysis the manager take a decision by

The first is that every decision must involve choosing from two or more alternatives

The second key concept is that once the alternative choices have been identified, decision makers must develop criteria for choosing among them.

The third key concept is that it is important to account for differential cost and differential revenue. When a company considers differential cost, it calculates the future expense of a decision and the future expense of one or more alternatives to that decision. When a company considers differential revenue, it calculates the future sales that would result from a decision and the future sales of one or more alternatives

Companies also look at avoidable cost and incremental cost as part of accounting for differential cost and differential revenue

The fifth decision-making concept is to avoid irrelevant costs. These are considerations of future costs that will not change based on other alternatives

Finally, the sixth decision concept is that a company should pay attention to opportunity cost.