Which of the Following Constitutes an Example of a Cost

question 72

Multiple Choice

Which of the following constitutes an example of a cost which is not incremental, and therefore not relevant in an accept/reject decision?

• A) A firm has a parcel of land that can be used for a new plant site or, alternatively, can be used to grow watermelons.
• B) A firm can produce a new cleaning product that will generate new sales, but some of the new sales will be from customers who switch from another product the company currently produces.
• C) A firm orders and receives a piece of new equipment which is shipped across the country and requires $25,000 in installation and set-up costs.
• D) All of the above are not examples of incremental cash flows.
• E) Answers a, b, and c are examples of incremental cash flows, and therefore, relevant cash flows.

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Definitions:

Ethnicity

A category of people who identify with each other based on shared attributes such as cultural heritage, language, history, or ancestry.

Medium Status

A position or level that is in the middle of a hierarchy or ranking system, neither high nor low.

Group Norms

The shared expectations and rules that guide behavior of people within social groups.

Conform

To align behaviors, attitudes, or beliefs with those of a group, often to fit in or comply with norms.