Escalation of Commitment to a Failing Course of Action

question 173

Multiple Choice

Escalation of commitment to a failing course of action

• A)only occurs if the decision maker was personally responsible for the initial loss.
• B)shows how people may treat sunk costs improperly.
• C)is what defines the occurrence of a risky shift.
• D)is the most common outcome of information overload.
• E)only occurs in highly competitive situations.

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Definitions:

Common Fixed Costs

Expenses shared by multiple segments or products within a company that do not change with the level of production or sales.

Variable Manufacturing Overhead

Costs of manufacturing overhead that vary directly with the level of production, such as utilities used in the production process.

Product Costs

Costs directly associated with the production of goods, including materials, labor, and manufacturing overhead.

Absorption Costing

A costing method that includes all manufacturing costs — direct materials, direct labor, and both variable and fixed manufacturing overhead — in the cost of a product.