Sala Co Is Contemplating the Replacement of an Old Machine with with a New

question 51

Multiple Choice

Sala Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered: If the old machine is replaced, it can be sold for $24,000.
Which of the following amounts is a sunk cost?

• A) $240,000
• B) $180,600
• C) $600,000
• D) $210,000

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Definitions:

Overapplied Overhead

A situation where the amount of overhead allocated to products or services exceeds the actual overhead expenses incurred.

Applied Overhead

The process of assigning a portion of estimated overhead cost to specific production jobs or departments based on a predetermined rate.

Actual Overhead

includes the real, as incurred, indirect costs associated with manufacturing a product or providing a service, including utilities and rent.

Cost Allocation

The process of assigning indirect cost to a cost object, such as a job.