If a Business Ignores Some of Its Fixed Costs as Irrelevant

question 133

Multiple Choice

If a business ignores some of its fixed costs as irrelevant to its production decision, this type of cost is termed:

• A)implicit costs
• B)spilt milk
• C)development costs
• D)sunk costs

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Definitions:

Liability Classification

The process of categorizing liabilities on the balance sheet as either current (due within one year) or long-term.

Short-Term Obligation

A debt or other financial obligation that is due to be paid within one year or within the entity's operating cycle if longer.

Long-Term Liability

Obligations or debts due in more than one year, reflecting a company's financing activities and including loans, bonds payable, and lease obligations.

GAAP Requirements

The standards or guidelines for financial accounting and reporting that accountants are required to follow, known as Generally Accepted Accounting Principles.