Management Accountants Are Frequently Asked to Analyze Various Decision Situations

Multiple Choice

Management accountants are frequently asked to analyze various decision situations including the following:

(1) Alternative uses of plant space, to be considered in a make/buy decision.
(2) Joint production costs incurred, to be considered in a sell-at-split-off-versus-process-further decision.
(3) Research and development (R&D) costs incurred in prior months, to be considered in a product-introduction decision.
(4) The cost of a special device that is necessary if a special sales order is accepted.
(5) The cost of obsolete inventory to be considered in a keep-versus-disposal decision.

The costs described in situations 2, 3, and 5 above are:

A) Prime costs.
B) Sunk costs.
C) Discretionary costs.
D) Relevant costs.
E) Differential costs.