When Fixed Costs Are Ignored Because They Are Irrelevant to a Business's

question 142

Multiple Choice

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

• A)explicit costs.
• B)implicit costs.
• C)sunk costs.
• D)opportunity costs.

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Definitions:

Petty Cash

A small amount of cash on hand used for covering minor expenses in an organization.

Periodic Inventory Method

An accounting method where inventory is updated and the cost of goods sold (COGS) is calculated at the end of an accounting period, instead of recording inventory transactions as they happen.

Delivery Expense

Costs incurred in transporting goods from a seller to the purchaser, which may include shipping fees, fuel, and labor.

Normal Balance

The side (debit or credit) on which increases to the account are recorded, depending on the account type.