The Term Incremental Cost Refers to

question 128

Multiple Choice

The term incremental cost refers to

• A)the difference in total costs between alternatives.
• B)a cost that does not entail any dollar outlay but that is relevant to the decision-making process.
• C)the profit forgone by selecting one choice instead of another.
• D)a cost that constitutes expenses to be incurred even though there is no activity.

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Definitions:

Variable Costs

Variable Costs are expenses that change in proportion to the activity of a business.

Fixed Costs

Costs that do not change with the volume of production or sales, such as rent, salaries, and insurance premiums.

Business Plan

A formal document detailing the goals, strategy, market, and financial projections for a business's operations.

Operating Income

The profit realized from a business's core operations, excluding deductions of interest and taxes.