The Economic Rule of Thumb That Only Future Costs and Benefits

question 40

Multiple Choice

The economic rule of thumb that only future costs and benefits, not past commitments, should be considered in making a decision is the

• A) sunk cost principle.
• B) escalation effect.
• C) endowment effect.
• D) contingency model.

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Definitions:

Joint Operation

A joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

Accounting Entry

A record in a company's financial accounts that documents a business transaction, affecting at least two accounts.

Inventories

Assets held for sale in the ordinary course of business, in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process or in the rendering of services.