When a Firm Has the Opportunity to Add a Project

question 47

Multiple Choice

When a firm has the opportunity to add a project that will utilize excess factory capacity (that is currently not being used) ,which costs should be used to help determine if the added project should be undertaken?

• A)allocated overhead costs
• B)sunk costs
• C)incremental costs
• D)average costs

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Definitions:

Shares of the Business

Equity units of a corporation that represent ownership interest held by shareholders, giving them a claim on the company's profits in the form of dividends.

Stock

A type of financial security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.