Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN: 9781947172609
Author: OpenStax
Publisher: OpenStax College
Textbook Question
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Chapter 10, Problem 1MC

______ are the costs associated with not choosing the other alternative.

A. Sunk costs

B. Opportunity costs

C. Differential costs

D. Avoidable costs

Expert Solution & Answer
Check Mark
To determine

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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________ are the costs associated with not choosing the other alternative.A. Sunk costsB. Opportunity costsC. Differential costsD. Avoidable costs
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Chapter 10 Solutions

Principles of Accounting Volume 2

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