ACCT 2301 Chapter Notes - Chapter 6: Opportunity Cost
22 Mar 2016
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Is future oriented: relevant costs be either fixed or variable, relevance is context sensitive, the most useful information is relevant and precise, can be both quantitative and qualitative. Sunk costs historical costs that have already been incurred. Opportunity cost is the sacrifice that is incurred in order to obtain an (cid:1) (cid:1) (cid:1) alternative opportunity. Opportunity costs are not cumulative (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) Differential revenue total revenue will be different if a product line is eliminated. Avoidable costs are the costs managers can eliminate by making specific choices. Relationship of cost avoidance to a cost hierarchy. Classifying costs into one of four hierarchical levels helps identify avoidable costs. Unit-level costs are costs incurred each time a company generates one unit of product. Product-level costs are costs incurred to support specific products or services: can be avoided by discontinuing a product line.
