Which of the Following Constitutes an Example of a Cost

question 128

Multiple Choice

Which of the following constitutes an example of a cost which is not incremental,and therefore not relevant in an accept/reject decision?

• A) A firm has a parcel of land that can be used for a new plant site or,alternatively,can be used to grow watermelons.
• B) A firm can produce a new cleaning product that will generate new sales,but some of the new sales will be from customers who switch from another product the company currently produces.
• C) A firm orders and receives a piece of new equipment which is shipped across the country and requires $25,000 in installation and set-up costs.
• D) All of the above are not examples of incremental cash flows.
• E) Answers a,b,and c are examples of incremental,and therefore relevant,cash flows.

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Definitions:

Activity-Based Costing

A method in cost accounting that assigns costs to products and services based on the activities involved in their production or delivery.

Activity Rates

Rates used in activity-based costing to assign overhead costs to products or services, based on the activities that drive those costs.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing more accurate cost information.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing detailed information on where and how costs are incurred.