Which of the Following Is Irrelevant When Making a Decision

question 16

Multiple Choice

Which of the following is irrelevant when making a decision?

• A) The original cost of an asset that the company is considering replacing
• B) The fixed overhead costs that differ among decision alternatives
• C) The cost of further processing a product that could be sold as is
• D) The expected increase in contribution margin of one product line as a result of a decision to drop a separate unprofitable product line

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Definitions:

Opportunity Cost

The foregone benefit that would have been derived by choosing an alternative option.

Differential Cost

A future cost that differs between any two alternatives.

Variable Cost Per Unit

The cost that varies with each unit produced, not including fixed costs.

Units Sold

The total number of units of a product that have been sold during a particular period.