Assume that you have decided to drive your car to Florida for the spring break. A classmate learns about your plans and asks about riding along with you. Required: Select how you would apply each of the following cost concepts to the task of determining how much, if any, cost you would take into consideration for the purposes of setting a price to be charged for taking the classmate with you. a. Differential cost. b. Allocated cost c. Sunk cost d. Opportunity cost How to allocate? Based on number of people, weight, number of suitcases, or what? What are other opportunities for you to earn revenue? What is the cost of alternative travel for your classmate? What costs have already been incurred and cannot be recovered, even if you don't make the trip? What costs will differ if a friend comes along?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Assume that you have decided to drive your car to Florida for the spring break. A classmate learns about your plans and asks about
riding along with you.
Required:
Select how you would apply each of the following cost concepts to the task of determining how much, if any, cost you would take into
consideration for the purposes of setting a price to be charged for taking the classmate with you.
a. Differential cost
b. Allocated cost
c. Sunk cost
d. Opportunity cost
How to allocate? Based on number of people, weight, number
of suitcases, or what?
What are other opportunities for you to earn revenue? What is
the cost of alternative travel for your classmate?
What costs have already been incurred and cannot be
recovered, even if you don't make the trip?
What costs will differ if a friend comes along?
Transcribed Image Text:Assume that you have decided to drive your car to Florida for the spring break. A classmate learns about your plans and asks about riding along with you. Required: Select how you would apply each of the following cost concepts to the task of determining how much, if any, cost you would take into consideration for the purposes of setting a price to be charged for taking the classmate with you. a. Differential cost b. Allocated cost c. Sunk cost d. Opportunity cost How to allocate? Based on number of people, weight, number of suitcases, or what? What are other opportunities for you to earn revenue? What is the cost of alternative travel for your classmate? What costs have already been incurred and cannot be recovered, even if you don't make the trip? What costs will differ if a friend comes along?
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