A. Differential costs 1. Cost of goods sold/average inventory 2.. Sales/average

Question

A. Differential costs

1. Cost of goods sold/average inventory

2.. Sales/average total sales

3. Net operating income-average operating assets

4. Cost that has been incurred and cannot be avoided regardless of what a manager decides to do.

5. Used to rank competing investments

6. The rate of return promised by an investment over its useful life

7. Has control over cost bu tnot over revenue or use of investment funds

8. =net operating income that an investment center earns above the minimum required return on its operating assets

9. includes cash, A/R, inventort, plant and equipment and other operating assets.

10. are also referred to as relevant cost and avoidable cost

11. time required to turn raw materials into completed products

12. current assets-current liabilities

13. is the potential beenfit given up when one alternative is selected over another

14. =net operating income/average operating assets

15. focuses on cash flow, it does not recognize the time value of money

Which number matches up with A.

Explanation / Answer

Differential cost is the difference between the cost of two alternative decisions, or of a change in output levels. The concept is used when there are multiple possible options to pursue, and a choice must be made to select one option and drop the others.

So based on the above Differential Cost is 5. Used to rank competing investments

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