When a decision is made in an organization, it is selected from a group of alternative courses of action (i.e., decision alternatives). The loss associated with not choosing a given decision alternative is referred to as a(n):
A) Sunk cost.
B) Discretionary.
C) Opportunity cost.
D) Committed cost.
E) Outlay cost.

Question

Quizplus · Accepted Answer

The loss associated with not choosing a given decision alternative is referred to as an opportunity cost. Opportunity cost is the cost of the next best alternative forgone. Sunk cost is a cost that has already been incurred and cannot be recovered. Discretionary costs are costs that can be changed, while committed costs are costs that cannot be changed. Outlay costs refer to actual cash outflows.

When a Decision Is Made in an Organization, It Is