Differential cost is one name for a cost that is relevant to a choice among alternatives.
Differential cost is sometimes called marginal cost or incremental cost. If a differential
cost will be incurred only if one particular alternative is followed, then that cost
can also be called an out-of-pocket cost associated with that alternative. An amount of
revenue or other benefit that will be missed or lost if a particular alternative is followed
is called an opportunity cost of that alternative. A cost that has already been incured and
is, therefore, irrelevant to a decision is referred to as a sunk cost. In a decision to discontinue
a product or division, some of the product's or division's costs may be unaffected
by the decision; these are called unavoidable costs. The avoidable costs, in contrast, are
relevant to the decision.
Differential cost is one name for a cost that is relevant to a choice among alternatives.Differential cost is sometimes called marginal cost or incremental cost. If a differentialcost will be incurred only if one particular alternative is followed, then that costcan also be called an out-of-pocket cost associated with that alternative. An amount ofrevenue or other benefit that will be missed or lost if a particular alternative is followedis called an opportunity cost of that alternative. A cost that has already been incured andis, therefore, irrelevant to a decision is referred to as a sunk cost. In a decision to discontinuea product or division, some of the product's or division's costs may be unaffectedby the decision; these are called unavoidable costs. The avoidable costs, in contrast, arerelevant to the decision.
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