Multiple Select QuestionSelect all that applyWhen making decisions, managers should consider all relevant benefits and relevant costs, which include: (Check all that apply.)Multiple select question.historical costs.incremental costs.opportunity costs.sunk costs.out-of-pocket costs.
Question
Multiple Select QuestionSelect all that applyWhen making decisions, managers should consider all relevant benefits and relevant costs, which include: (Check all that apply.)Multiple select question.historical costs.incremental costs.opportunity costs.sunk costs.out-of-pocket costs.
Solution
When making decisions, managers should consider all relevant benefits and costs. Here are the options that apply:
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Incremental costs: These are the costs that will change based on the decision made. They are relevant because they can increase or decrease based on the outcome of the decision.
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Opportunity costs: These are the costs of the next best alternative that is forgone. They are relevant because they represent the benefits that could have been gained had a different decision been made.
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Out-of-pocket costs: These are the actual cash outflows that will occur as a result of the decision. They are relevant because they represent the actual cash impact of the decision.
Historical costs and sunk costs are not typically relevant to decision making.
Historical costs are the original costs of an asset, which do not change regardless of the decision made.
Sunk costs are costs that have already been incurred and cannot be recovered. They should not influence the decision because they will remain the same regardless of the outcome.
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