Short Term Decision making

Costs that a business must incur to perform an activity at a given level, but that it can avoid if the business reduces or discontinues the activity.

• Incremental costs

• Avoidable costs

• Opportunity costs

• Sunk costs

Cost increases resulting from a higher volume of activity or from the performance of an additional activity

• Incremental costs

• Avoidable costs

• Opportunity costs

• Sunk costs

The profits that a business forgoes by following a particular course of action

• Incremental costs

• Avoidable costs

• Opportunity costs

• Sunk costs

Money that has already been spent and cannot be recovered. It is a cost that occurred in the past.

• Incremental costs

• Avoidable costs

• Opportunity costs

• Sunk costs

Costs that will change as a result of a decision, that is will differ among the alternatives.

• Irrelevant costs

• Avoidable costs

• Opportunity costs

• Revevant costs

Future costs that a business will incur for activities that are NOT necessary to carry out the decision

• Irrelevant costs

• Avoidable costs

• Opportunity costs

• Revevant costs

Wages paid for factory labour used in producing a product?

• Fixed cost

• Variable cost

• Opportunity cost

• Sunk cost

Raw materials used in making a product

• Fixed

• Variable

• Sunk

• Irrelevant

Dara makes bracelets and sells them in her shop. Which is a fixed expense for Dara’s business?

• the cost of the beads

• the cost of the string

• the cost of advertising

• rent for her shop

If Sam's Sandwiches use 25c of material for each sandwich, what will be their variable costs for 10 sandwiches

• 10 x 0.25 = $2.50

• 2.5 x 10 = $25

• 25 x 10 = $250

• 0.25/10 = 2.5c