The Determining Factor of Whether an Expense Is Specific or General

question 79

Multiple Choice

The determining factor of whether an expense is specific or general is:

• A) Whether it can be linked to a particular product
• B) Whether it is categorized as part of cost of goods sold or part of general and administrative expenses
• C) Whether the company used the full-cost or contribution-margin approach
• D) The object of measurement being used
• E) Whether the focus of the analysis is on the net profit or net expenses

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Definitions:

Avoidable Cost

A cost that can be eliminated by choosing one alternative over another in a decision. This term is synonymous with differential cost and relevant cost.

Activity-Based Costing

An accounting method that assigns costs to products based on the activities involved in producing those products.

Decision

The process of making choices among alternative courses of action.

Sunk Costs

Costs that have already been incurred and cannot be recovered, and thus should not affect future business decisions.