COMMERCE 2AB3 Final: ch11tif
27 Nov 2018
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True/false: a decision model is a formal method for making a choice, frequently involving both quantitative and qualitative analyses. Feedback from previous decisions uses historical information and, therefore, is irrelevant for making future predictions. Historical costs may be helpful in making future predictions, but are not relevant costs for decision making. The amount paid to purchase tools last month is an example of a sunk cost. For decision making, differential costs assist in choosing between alternatives. For a particular decision, differential revenues and differential costs are always relevant. Answer: true: a cost may be relevant for one decision, but not relevant for a different decision, revenues that remain the same for two alternatives being examined are relevant. Revenues that remain the same between two alternatives are irrelevant for that decision since they do not differ between alternatives. Sunk costs are past costs that are unavoidable: quantitative factors are always expressed in numerical terms.
