Question

Select either true or false for the following statements

  

1.	An opportunity cost is the potential benefit that is lost by taking a specific action when two or more alternative choices are available.	(Click to select)FalseTrue
2.	A sunk cost will change with a future course of action.	(Click to select)FalseTrue
3.	An out-of-pocket cost requires a current and/or future outlay of cash.	(Click to select)FalseTrue
4.	Relevant costs are also known as unavoidable costs.	(Click to select)TrueFalse
5.	Incremental costs are also known as differential costs.	(Click to select)FalseTrue

Answer 1

1. The answer would be True

When two or more alternatives are available then the benefit lost by not choosing the other alternatives is known as Oppurtunity Cost.

2. The answer would be False

Sunk costs are those costs which are already incurred by the company and such cost will not change in future. The business may take any future course of action but the Sunk Costs will not change.

3. The answer would be True

Out of Pocket expenses are usually associated with the management. It depends on the management whether they require to incur such expenses. They may even decide not to incur such expenses. Thus it requires a current and/or future outlay of cash.

4.The answer would be False

Relevant Costs are known as Avoidable Costs. It means such cost can be avoided if a particular activity or work is not performed.

5. The answer would be True

Incremental costs are known as differential costs. It can be defined as the additional cost that a business would incur if it selects a particular course of action over the other alternatives.