Chapter 23, Problem 5QS

To determine

Relevant Costs:

Relevant cost is cost which material for the decision is making process. This cost is likely to be change in subsequent period depending on the decision of the manager.

Incremental Costs:

Incremental cost refers to additional cost incurred to the Company due to change in production activity.

Out-of-Pocket Cost:

Out-of-pocket cost are cost which require investment or outflow of cash to be made in current period. This is a prospective investment for future to be decided by management.

Opportunity Cost:

Opportunity cost is the gain sacrificed in order to gain or acquire something else or other alternative.

Sunk Cost:

Sunk cost is the cost already incurred by the management and has no use for the decision making process.

To identify: Activities listed below are either true (T) or false (F).