Great Outdoors Company operates a store in downtown Denver that has five departments including a fishing department. If the fishing department is closed, the store manager's position will not be affected, but if the entire store is closed, the manager will be terminated. Which of the following lessons should be learned from this example?

1) Opportunity costs are always present.

2) Sunk costs cannot be avoided.

3) Relevance of costs is context sensitive.

4) Information does not have to be precisely accurate in order to be relevant.

Question

Johan Hendrix

Business

25 July, 12:06

Great Outdoors Company operates a store in downtown Denver that has five departments including a fishing department. If the fishing department is closed, the store manager's position will not be affected, but if the entire store is closed, the manager will be terminated. Which of the following lessons should be learned from this example?

1) Opportunity costs are always present.

2) Sunk costs cannot be avoided.

3) Relevance of costs is context sensitive.

4) Information does not have to be precisely accurate in order to be relevant.

+4

Answers (1)

Know the Answer?

Zion Bond · Answer 1

Relevance of costs is context sensitive

Explanation:

Relevant costs' can be referred to as any cost relevant to a decision. A matter is relevant if there is a change in cash flow that is caused by the decision made. The concept of relevant cost is used to do away with every unnecessary data that could complicate the decision-making process.