Question

When making decisions, managers should consider all relevant benefits and relevant costs, which include: (Check all that apply.)

Answer 1

Answer: e. a, b and c

Explanation:

Opportunity costs are very important costs to look at because they help a company know if they are picking the best alternative available to them.

Out-of-pocket costs are also quite important because the company needs to know if there is a chance that they will have to pay for special features in the project that are not part of the original project but need to be paid for anyway as these monies come out of the cash reserve.

Incremental costs focus on the additional costs involved in a project and so are very important. When making a decision for processing a good further for instance, management needs to know if the incremental cost will be covered by the extra profit that will be gained.