The Term Differential Cost Refers To

question 8

Multiple Choice

The term differential cost refers to:

• A)a cost which continues to be incurred even though there is no activity.
• B)a cost which does not entail any dollar outlay but which is relevant to the decision-making process.
• C)a difference in cost between any two alternatives.
• D)the potential benefit forgone by selecting one alternative instead of another.

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Definitions:

Sequential Method

A procedure used in cost accounting to allocate service department costs to producing departments in a specific sequence.

Support Department Costs

Costs associated with the functions that assist the operational activities of a company, including HR, IT, and maintenance services, indispensable for production but not part of the direct manufacturing process.

Sequential Method

A process approach where tasks or operations are performed one after another in a specific order.

ABC

Activity-Based Costing, a method of assigning overhead and indirect costs to specific products or activities based on their use of resources.