When Risk Responses Are Being Considered, the Costs and Benefits

question 94

True/False

When risk responses are being considered, the costs and benefits of options may play a major role in the final decision.

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Definitions:

Sunk Cost

Costs that have already been incurred and cannot be recovered, which should not influence future business decisions.

Period Cost

Expenses that are not directly tied to the production process and are charged to the period in which they are incurred.

Future Decisions

Decisions that will be made in the future, often based on forecasts or projections.

Variable Cost Method

A pricing strategy that only accounts for direct materials, direct labor, and variable manufacturing overhead costs, excluding any fixed costs from its calculations.