Which of the Following Are Examples of Ignoring the Fungibility

question 36

Multiple Choice

Which of the following are examples of ignoring the fungibility of money?
I. Sitting through a bad movie because you've already paid for the ticket.
II. Charging an item to a high-interest credit card when you have the money available in a savings account.
III. Changing your mind about putting your current paycheck in a savings account and deciding to put your next paycheck toward savings instead.

• A)I and II only
• B)I and III only
• C)II only
• D)III only

Gain knowledge about the simple rate of return method and its application.

Learn how to evaluate investment proposals using the profitability index.

Understand the concept of incremental cost approach in capital budgeting.

Recognize the importance of post-audit in capital budgeting and how it can provide feedback on the investment's performance.

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Definitions:

Variable Expenses

Costs that change in proportion to the activities or volume of a business.

Net Operating Income

A measure of a company's profitability from its regular business operations, excluding expenses and revenues that are unrelated to the primary business activities.

Absorption Costing

Absorption costing is an accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - in the cost of a product.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, excluding fixed manufacturing overhead.