A Cost Incurred in the Past That Is Not Relevant

question 241

Multiple Choice

A cost incurred in the past that is not relevant to any current decision is classified as a(n) :

• A) period cost.
• B) opportunity cost.
• C) sunk cost.
• D) differential cost.

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Definitions:

Variable Costs

Expenses that fluctuate with the level of output, including costs such as raw materials and labor.

Fixed Costs

Expenses that do not change with the level of production or sales.

Contribution Margin

The amount by which sales revenue exceeds variable costs, indicating how much revenue contributes to fixed costs and profit.

Variable Costs

Variable costs that change in direct correlation with production output or sales figures, like labor costs and materials expenses.