When Making Decisions, It Is Important to Consider Only Those

question 61

True/False

When making decisions, it is important to consider only those costs that actually involve an explicit money outlay.This is because such costs actually have to be paid, whereas implicit costs are only notional or hypothetical.

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Definitions:

Cost of Merchandise Sold

The total cost incurred to purchase or produce the goods sold by a company during a specific period.

Gross Profit

The financial metric representing the difference between revenue and the cost of goods sold, indicating how efficiently a company is producing its goods.

Cost Flow Assumption

A method of accounting designated to assess inventory worth and calculate the cost of goods sold, which can be either FIFO (First-In, First-Out) or LIFO (Last-In, First-Out).

Physical Flow of Goods

Refers to the actual movement of goods through the production process to the customer, distinct from the accounting or paper flow.