Chapter 25, Problem 16E

Exercise 25-16

Relevant costs

C1

Complete the following descriptions using the terms a through e.

a. Opportunity cost

b. Avoidable costs

c. Sunk cost

d. Relevant benefits

e. Out-of-pocket cost

1. A ____ arises from a past decision and cannot be avoided or changed; it is irrelevant to future decisions.

2. ___ refer to the incremental revenue generated from taking one particular action over another.

3. Relevant costs are also known as ___ .

4. An ___ requires a future outlay of cash and is relevant for current and future decision making.

5. An ___ is the potential benefit lost by taking a specific action when two or more alternative choices are available.