(Solved):When managers make decisions about adding or dropping customers, managers only focus on: a)…

 

Question

When managers make decisions about adding or dropping customers, managers only focus on:

a) incremental costs only

b) allocating overhead costs

c) incremental and opportunity costs only

d) opportunity costs only

e) the value-chain and not cost factors

 

EXPERT ANSWER

  • The answer is c) incremental and opportunity costs only.

In an incremental analysis like this, the company would consider both incremental and opportunity costs because these affect the managers’ decisions in the future. It helps to determine if

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