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    How are costs defined?

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    We learned about other types of cost classifications, such as differential costs, sunk costs, and opportunity costs. How are these types of costs defined? How could these concepts be used in managerial decision making? Please provide an example.

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    Differential costs are the costs when deciding between two alternatives. It is the dollar amount of difference that differs. If alternative one costs a total of $500 to make and alternative two costs $600 to make, the differential cost is $100. A sunk cost is a cost that is unrecoverable. The money paid for the land that a plant will someday be situated on is a sunk cost. I can sell the land and recoup part of the money, but the actual amount I paid for the land can never be ...

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    We learned about other types of cost classifications, such as differential costs, sunk costs, and opportunity costs. How are these types of costs defined? How could these concepts be used in managerial decision making? Please provide an example.

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