Question

(4pts) 19) Differential analysis is an approach to the analysis of relevant costs that focuses on the costs that differ under alternative actions. True O False (4pts) 20) Which of the following statements about sunk costs is true? Sunk costs are the result of past decisions. Sunk costs are never relevant to decisions. Sunk costs do not vary between decision alternatives. All of the above. 21) The point in the production process where joint products become separately identifiable is (4pts) called the conversion point. the point of sale. the split-off point. o the throughput point.

Answer 1

Question 19

The Statement is True.

Differential Analysis is an approach which is being devised to analyse and interpret the relevant costs between various alternatives available with an organisation. It usually avoids the costs which are same among various alternatives. it helps in decision making by putting focus and relaince on the costs which are project specific which makes it easier for an organisation to decide which alternative to opt for on the basis of cost benefit analysed from the differential costing analysis.The focus of the approach is to avoid common costs and put the analysis work on the costs which differ upon the choice of alternative and make a decision based in that.

Question 20

Option D ( All of the above ) is the Correct Answer.

Sunks Costs are those which are a result of the last decision and which don not change in the future. as they are past costs they are considered irrelevant costs for future decisions making as these costs do not have a role to play in future. Moreover they are same among all alternative. For Example A Company takes a building tent on $ 50,000 a month and the decision is either to use it for manufacturing pencils or pens. Rent costs here in the decision making is of no use as it is a sunk costs and will continue to occur whether the pencils are produced or pens or nothing is produced. they will still be thersme so it is of no use.

Question 21

Option C ( the splitoff point ) is the Correct Answer.

Split off point is the point at which the various products from a primary input are differently identified and have an individual value according to their demand and need. For Example Crude oil is the basic primary input and the results like pertrol , diesel etc are the products which are obtained from it. A particular point where these products are specifically identifiable that point is known as split off point. At that juncture eithe they can be further produced or sold as it is as per their nature and composition and their market requirements.