Short Term Decision Making: Learning Objectives and Relevant Costs

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Why is it important to differentiate relevant costs from irrelevant costs in short-term decision making?

To focus on past, committed costs

To simplify and shorten the data gathering process (correct)

To avoid info overload from too much data

To increase the historic cost for future actions

Which of the following is an example of an irrelevant cost in short-term decision making?

Future revenue

Depreciation (correct)

Cost that differs between alternatives

Sunk cost

What characteristic makes a future cost relevant in short-term decision making?

It is cash in nature (correct)

It is committed cost

It affects the historic cost

It is a sunk cost

When would a future cost not be relevant in short-term decision making?

If each alternative will involve the same amount of cost Signup and view all the answers

What is the primary reason to avoid irrelevant costs in short-term decision making?

To prevent info overload from too much data Signup and view all the answers

Which type of cost refers to the difference in costs between decision options?

Differential cost Signup and view all the answers

What type of costs are incurred as a result of taking an option, which otherwise would not have been incurred?

Special fixed costs Signup and view all the answers

What is the resource item required in the making of a product but is limited in supply?

Limiting factor Signup and view all the answers

What is the process aimed at identifying and removing constraints in organizational processes that are standing in the way of organizational goals?

Theory of Constraints (TOC) Signup and view all the answers

What refers to anything that limits an organizational entity from moving toward or achieving its goal?

Constraint Signup and view all the answers

Why is it important to differentiate relevant costs from irrelevant costs in short-term decision making?

To simplify and shorten the data gathering process Signup and view all the answers

In short-term decision making, when is a future cost not relevant?

When each alternative will involve the same amount of cost Signup and view all the answers

What characteristic makes a future cost relevant in short-term decision making?

Being cash in nature Signup and view all the answers

What refers to anything that limits an organizational entity from moving toward or achieving its goal?

Constraint Signup and view all the answers

When would historic costs (sunk, past, committed costs) be considered irrelevant in short-term decision making?

When they can be changed Signup and view all the answers

Which of the following types of costs refers to the potential benefit given up when choosing one action over another?

Opportunity cost Signup and view all the answers

What type of costs can be saved by not adopting a given alternative and can be identified as potential savings from discontinuing decisions?

Avoidable cost Signup and view all the answers

In the context of labor and overhead costs, which of the following would be considered an irrelevant cost?

Monthly salary which is fixed and therefore irrelevant if the workers are taken away to do extra work Signup and view all the answers

What is the primary characteristic of sunk costs in decision-making?

They are costs that have already been incurred and cannot be changed. Signup and view all the answers

What is the process aimed at identifying and removing constraints in organizational processes that are standing in the way of organizational goals called?

Theory of Constraints (TOC) Signup and view all the answers

Short Term Decision Making: Learning Objectives and Relevant Costs

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Questions and Answers

Why is it important to differentiate relevant costs from irrelevant costs in short-term decision making?

Which of the following is an example of an irrelevant cost in short-term decision making?

What characteristic makes a future cost relevant in short-term decision making?

When would a future cost not be relevant in short-term decision making?

What is the primary reason to avoid irrelevant costs in short-term decision making?

Which type of cost refers to the difference in costs between decision options?

What type of costs are incurred as a result of taking an option, which otherwise would not have been incurred?

What is the resource item required in the making of a product but is limited in supply?

What is the process aimed at identifying and removing constraints in organizational processes that are standing in the way of organizational goals?

What refers to anything that limits an organizational entity from moving toward or achieving its goal?

Why is it important to differentiate relevant costs from irrelevant costs in short-term decision making?

In short-term decision making, when is a future cost not relevant?

What characteristic makes a future cost relevant in short-term decision making?

What refers to anything that limits an organizational entity from moving toward or achieving its goal?

When would historic costs (sunk, past, committed costs) be considered irrelevant in short-term decision making?

Which of the following types of costs refers to the potential benefit given up when choosing one action over another?

What type of costs can be saved by not adopting a given alternative and can be identified as potential savings from discontinuing decisions?

In the context of labor and overhead costs, which of the following would be considered an irrelevant cost?

What is the primary characteristic of sunk costs in decision-making?

What is the process aimed at identifying and removing constraints in organizational processes that are standing in the way of organizational goals called?

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