Instructor%20Notes%20-%20Chapter%2016 - Management 200T...

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Management 200T Cost Analysis for Decision Making Chapter 16 Cost Classifications Cost Classifications for Other Analytical Purposes Differential Cost – one that will differ according to the alternative activity that is selected If a modification of an existing product is being considered, only the changes in cost resulting from the modification need to be considered relative to the additional revenues expected to result from the modification Costs that will continue to be incurred whether or not the modification is made are not relevant to the decision Allocated Costs – costs that have been assigned to a product or activity using some sort of arithmetic process Overhead Be very careful about conclusions made from an analysis that includes allocated costs Do not arbitrarily allocate costs to a responsibility center because the allocated costs may not behave the way assumed in the allocation method. Sunk Costs – a cost that has been incurred and cannot
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Instructor%20Notes%20-%20Chapter%2016 - Management 200T...

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