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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Why should the incremental cost of a risk response alternative be considered when deciding how best to respond to an important risk?

To determine

Explain the reason due to which incremental costs are considered while deciding the best response to an important risk.

Explanation

Incremental Costs:

Incremental costs are the costs incurred for responding to a particular risk. Incremental cost is subtracted from response benefit to obtain net response benefits.

For important risks, organizations identify various alternatives to reduce that risk. To select a particular alternative, organizations calculate net response benefit.

Net response benefit is calculated by subtracting incremental cost from response benefit...

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