The key to determining the financial difference between two alternative courses of action is to identify the ________.
A) opportunity cost of each alternative
B) marginal cost
C) differential costs and revenues
D) joint cost of both alternatives

Question

Quizplus · Accepted Answer

Differential costs and revenues refer to the costs and revenues that differ between two alternative courses of action. By subtracting the costs and revenues of one alternative from the costs and revenues of another alternative, we can determine the financial difference between the two alternatives and make an informed decision about which one to choose. A is incorrect because opportunity cost is only one aspect of the decision-making process, and it may not be enough to determine the financial difference between alternatives. B is incorrect because marginal cost only accounts for the additional cost of producing one additional unit, and it may not be enough to compare two different alternatives. D is incorrect because joint costs are costs that are incurred jointly for two or more products or services, and they cannot be used to determine the financial difference between two alternative courses of action.

The Key to Determining the Financial Difference Between Two Alternative