Relevant (I.e., Differential) Cost Analysis

question 1

Multiple Choice

Relevant (i.e., differential) cost analysis:

• A) Takes all variable and fixed costs into account to analyze decision alternatives.
• B) Considers only variable costs as these are the costs that change with each decision alternative.
• C) Considers only nonfinancial and strategic factors associated with each decision alternative.
• D) Considers all variable and fixed future costs that change with each decision alternative.
• E) Allows the decision maker to group all types of costs together to facilitate decision making.

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Definitions:

Schedule Of Cost Of Goods Sold

A detailed statement showing the direct costs, indirect costs, and manufacturing overheads incurred to produce goods sold in a period.

Finished Goods Inventory

This inventory includes products that have completed the manufacturing process but have not yet been sold to customers.

Cost Of Goods Manufactured

The total manufacturing costs of goods that are completed and ready for sale within a specific accounting period.

Manufacturing Overhead

All manufacturing costs that are not directly traceable to a product, including costs associated with running the production facility.