47) Are relevant revenues and relevant costs the only information needed by managers to select among alternatives? Explain using examples.

48) Explain why sunk costs are not considered relevant when choosing among alternatives.

 

11.3   Explain why opportunity cost is relevant and book value is irrelevant in decision making.

 

1) The gain or loss on the disposal of a machine is a relevant factor when considering replacing the machine.

 

2) Opportunity cost is the contribution to income that is recognized through the use of limited resources available in the best alternative.

 

3) Book value of equipment is irrelevant in equipment-replacement decisions.

 

4) An item’s book value is the historical cost plus accumulated amortization.

 

 

5) Quantitative factors are relevant, and qualitative factors are irrelevant, in making outsourcing decisions.

 

6) When replacing an old machine with a new machine, the purchase price of the old machine is a relevant cost.

 

 



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