Which of the Following Statements Is CORRECT

question 31

Multiple Choice

Which of the following statements is CORRECT?

• A) A sunk cost is any cost that must be expended in order to complete a project and bring it into operation.
• B) A sunk cost is any cost that was expended in the past but can be recovered if the firm decides not to go forward with the project.
• C) A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered if the firm decides not to go forward with the project.
• D) Sunk costs were formerly hard to deal with but now that the NPV method is widely used, it is possible to simply include sunk costs in the cash flows and then calculate the PV of the project.
• E) A good example of a sunk cost is a situation where Home Depot opens a new store, and that leads to a decline in sales of one of the firm's existing stores.

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Definitions:

Push Production

A manufacturing process where products are made based on predicted demand and pushed to the market, as opposed to being pulled by actual demand.

Just-In-Time

A production strategy that aims to reduce times within the production system as well as response times from suppliers and to customers by receiving goods only as they are needed in the production process, thereby reducing inventory costs.

Work in Process Inventory

Items that are in the process of being manufactured but are not yet complete, often tracked for cost accounting purposes.

Cost of Goods Sold

The straight costs associated with producing the goods that a company sells, which include labor and materials.