Costs that change in response to alternative courses of action are called___________?
Correct answer: B. Differential costs
- A. Relevant costs
- B. Differential costs
- C. Target costs
- D. Sunk costs
Explanation
Differential costs are the differences in cost between alternative courses of action, so they change when the decision changes. Sunk costs cannot be altered, while target costs are planned allowable costs rather than decision-related changes.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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