Question

(1) When deciding between alternative courses of​ action, all past costs should be ignored.

​(2) When deciding between alternative courses of​ action, all future costs should be taken into account. Which of these statements​ is/are correct?

A. 2 only
B. 1 only
C. Neither 1 nor 2
D. 1 and 2"

Answer 1

Ignoring past costs and considering future costs is the correct approach when deciding between alternative courses of action. Sunk costs, which are costs incurred in the past and cannot be recovered, should be disregarded in the decision-making process. Making decisions based on what will happen in the future allows for a more rational and efficient allocation of resources.

Step-by-step explanation:

Ignoring past costs and considering future costs is the correct approach when deciding between alternative courses of action. Sunk costs, which are costs incurred in the past and cannot be recovered, should be disregarded in the decision-making process. Making decisions based on what will happen in the future allows for a more rational and efficient allocation of resources. For example, if a company has invested a large amount of money in a failing project, it should consider the future costs and benefits of continuing with the project rather than being influenced by the past costs already incurred.