Which of the Following Is an Example of an Implicit

question 259

Multiple Choice

Which of the following is an example of an implicit cost?

• A) wages paid to employees
• B) interest paid to a bank on a building loan
• C) the cost of using capital an owner donates to the business
• D) dollars paid to a supplier for materials used in production
• E) liability insurance payments made only once a year

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Definitions:

Incremental Analysis

The process of comparing the additional costs and benefits of different alternatives in order to make decisions.

Unprofitable Segment

A division or business unit within a company that consistently generates losses instead of profits, affecting the overall financial health of the company.

Manufacturing Variances

Differences between the actual costs and standard (expected) costs incurred during production, which can be categorized into material, labor, and overhead variances.

Incremental Analysis

The process of identifying the financial data that changes under alternative courses of action, used for decision-making in business.