True or false? Fixed costs are always irrelevant in operational decisions because they do not change with production volume.

True

False

Ryan is a manager in a bank. He is using cost information to make a number of operational decisions. Some of these costs are salaries for other employees, who have formal one-year employment contracts. Which of the following statements are true regarding these costs? (Check all that apply.)

Ryan can deem contracted salary costs as irrelevant for most operational decisions.

Because contracted salary costs have not yet been incurred, they are not actually sunk costs.

Because contracted salary costs are labor-oriented, they will always be relevant to operational decisions.

Ryan can classify salary costs as sunk, regardless of whether there is a contract.

Shelby is considering whether to drop a product line from her business. Some administrative costs are being allocated to the product line but will not change in total if Shelby decides to drop the product line. Which of the following statements are true regarding these costs? (Check all that apply.)

The allocated administrative costs are irrelevant because they are not direct costs.

Administrative costs are always relevant.

The allocated administrative costs are irrelevant because they will not change as a result of the decision.

The allocated administrative costs are irrelevant because they will just be re-allocated to remaining product lines.