This post addresses costs, cost pools and cost drivers.
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(a) What are relevant, opportunity and sunk costs? Provide an example of each.
(b) Take any product and explain the cost pools and cost drivers for that product.
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The solution explains what relevant, opportunity, and sunk costs are and provides examples of each. The solution also explains the cost pools and cost drivers for a product.
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(a) What are relevant, opportunity and sunk costs? Provide an example of each.
Relevant costs are costs that are used to determine the best option when conducting an analysis or for decision-making purposes. An example would be when management is trying to decide if they should continue making a part used in their production or if they should buy the part from a supplier. The relevant costs would include the costs needed to make the part and the costs that would be incurred if they buy, like shipping fees.
An opportunity cost is always the cost of the alternative that ...
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