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When making decisions, managers should consider all relevant benefits and relevant costs, which include: (Check all that apply.)Multiple select question.out-of-pocket costs.opportunity costs.incremental costs.historical costs.sunk costs.

Question

When making decisions, managers should consider all relevant benefits and relevant costs, which include: (Check all that apply.)Multiple select question.out-of-pocket costs.opportunity costs.incremental costs.historical costs.sunk costs.

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Solution

When making decisions, managers should consider:

  1. Out-of-pocket costs: These are the direct costs that a company incurs when producing goods or services. For example, raw materials, wages, and rent.

  2. Opportunity costs: This is the cost of forgoing the next best alternative. For example, if a manager decides to invest in a new project, the opportunity cost could be the return on investment from a different project that could have been undertaken.

  3. Incremental costs: These are the additional costs that will be incurred as a result of a particular decision. For example, if a decision is made to increase production, the incremental cost would be the additional cost of producing more units.

  4. Historical costs: These are the costs that have been incurred in the past. While they can provide useful information, they should not be the sole basis for future decision-making as they do not reflect potential future costs.

  5. Sunk costs: These are costs that have already been incurred and cannot be recovered. While they may be painful to consider, they should not influence decision-making as they cannot be changed.

So, all of the above options apply.

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