______ are the costs associated with not choosing the other alternative.
A. Sunk costs
B. Opportunity costs
C. Differential costs
D. Avoidable costs
Introduction:
Business decision-making is a process applied to each decision carried out by the management. It can be performed by identifying business goals and objectives. Business decision-making provides solutions for a problem, comprehensive analysis, deciding the best action course depending upon the analysis.
To choose:
The correct answer for the statement.
Answer to Problem 1MC
The correct option is B.
Explanation of Solution
Explanation for correct answer:
Opportunity Cost are those costs which are associated with the value of the next maximum valued alternative use of that resource.
Explanation for incorrect answer:
A sunk cost is the cost that has already occurred and cannot be avoided. It will not change regardless of the management’s chosen alternative. Differential cost is the difference between the two alternatives in a particular activity. Avoidable cost is the cost that can be eliminated when one alternative is chosen over another.
Thus, the options A, C and Dare not associated with not choosing the other alternative.
Conclusion:
The correct answer is B. Opportunity costs are the costs when one alternative is chosen over another alternative.
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Chapter 10 Solutions
Principles of Accounting Volume 2
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