Module 8

Question 1

Relevant information is really a very simple idea: what is it?

Answer 1

> When making decisions, we should only consider
factors that are relevant to the decision.

Question 2

The first thing to understand when making a decision involving various alternates is that:

Answer 2

> s that only those costs
and benefits that differ among alternatives are relevant and therefore need to be considered.

> If the various alternatives have some of the same costs or benefits, then these costs or benefits are
considered irrelevant and will have no impact on the decision.

Question 3

When a cost is avoidable, it is:

Answer 3

> If a cost is avoidable it is relevant.

Question 4

If a cost is unavoidable, it is:

Answer 4

> If the cost is unavoidable, it is irrelevant and should not be considered as part of the decision

Question 5

Unavoidable costs are what kind of costs?

Answer 5

> Unavoidable costs are sunk costs (they have already been incurred or have been committed to and
therefore cannot be avoided).

Question 6

If the sunk or unavoidable costs will have no impact on the decision, can we just look at those costs that
differ between the two alternatives?

Answer 6

> Yes!