Relevant Costs in Business Decisions

question 90

Essay

Relevant costs in business decisions
(a)Explain what is meant by each of the following terms: opportunity cost,sunk cost,and out-of-pocket cost.
(b)Identify which,if any,of the above three types of cost would be considered relevant in making a business decision.

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Definitions:

Distance From The Mean

The absolute difference between a specific value and the average of all values in a dataset.

Z Scores

Standardized scores that indicate how many standard deviations an element is from the mean of the dataset. They are used in statistics to compare different data points.

Normal Curve

A graphical representation of a distribution where the majority of data points are concentrated around the mean, decreasing in frequency the farther they are from the mean.

Percentages

A portion or share of a whole, expressed as a fraction of 100.