Relevant Costs in Decision Making Quiz
Test your knowledge on relevant costs, sunk costs, opportunity costs, and decision making in managerial accounting.
#1
Which of the following costs are relevant in decision making?
Sunk costs
Fixed costs
Opportunity costs
All of the above
#2
What is a sunk cost?
A cost that can be changed
A cost that has been incurred and cannot be recovered
A cost that varies with the level of production
A cost that is incurred in the future
#3
Which of the following costs is not relevant in decision making?
Sunk costs
Incremental costs
Variable costs
Fixed costs
#4
What is the formula to calculate incremental revenue?
Total revenue / Quantity
Final revenue - Initial revenue
Price per unit * Quantity
Total revenue - Variable costs
#5
What is the primary focus of relevant costing?
Maximizing total costs
Minimizing total revenue
Considering only future costs
Considering only costs that differ among alternatives
#6
Which of the following is an example of an avoidable cost?
Direct materials
Sunk costs
Variable overhead
Fixed overhead
#7
When making a decision, which costs should be compared?
Total costs of one alternative with total revenue of another alternative
Fixed costs of one alternative with variable costs of another alternative
Relevant costs of each alternative
Historical costs of one alternative with projected costs of another alternative
#8
What is the key difference between relevant costs and irrelevant costs?
Relevant costs are future-oriented, while irrelevant costs are past-oriented
Relevant costs are fixed, while irrelevant costs are variable
Relevant costs can be controlled, while irrelevant costs cannot
Relevant costs are historical, while irrelevant costs are future-oriented
#9
Which of the following is an example of an opportunity cost?
Cost of raw materials
Rental income from leasing out a building you own
Cost of direct labor
Depreciation expense
#10
What is the opportunity cost of choosing one alternative over another?
The difference in revenue between the two alternatives
The cost incurred from choosing one alternative
The benefit foregone from not choosing the next best alternative
The total cost of both alternatives
#11
Which of the following is a characteristic of a relevant cost?
It is a historical cost
It is incurred in the past
It varies between alternatives
It includes fixed costs
#12
What is the term used to describe the difference in costs between two alternatives?
Incremental cost
Sunk cost
Opportunity cost
Avoidable cost
#13
Which of the following costs would typically be considered an irrelevant cost?
Sunk costs
Opportunity costs
Variable costs
Incremental costs
#14
Which of the following best describes an incremental cost?
A cost that remains constant regardless of the decision
A cost that changes with the level of activity
The difference in total costs between two alternatives
A cost that is irrelevant to the decision
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