Cost classifications used in making decisions: differential costs, opportunity costs, and sunk costs are explained below.
A differential cost is a difference in costs among any two alternatives.
The opportunity cost is the potential benefit lost when one alternative is chosen over another.
Opportunity costs are not typically recorded in an organization's accounting records, however, they must be explicitly considered in every decision taken by a manager.
Almost every alternative has some opportunity cost associated with it.
A sunk cost is a cost which has already been incurred and can't be changed by any current or future decision.
Sunk costs are not differential costs as they can't be changed by any decision.
As a result, sunk costs can and should be ignored when making a decision.
Hence, costs can be classified on the basis of making decisions.
Learn more about opportunity cost:
https://brainly.com/question/8846809
#SPJ4
