When Is It Appropriate to Include Sunk Costs in the Evaluation

question 14

Multiple Choice

When is it appropriate to include sunk costs in the evaluation of a project?

• A) Whenever they are relatively large
• B) If they improve the project's NPV
• C) If they are considered to be overhead costs
• D) Never

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Definitions:

Fiscal Period

Any designated period of time for accounting purposes, typically a year, used by governments and businesses for financial reporting and budgeting.

Adjusting Entry

A journal entry made at the end of an accounting period to update the accounts and ensure they reflect the true financial position of the business.

Summary of Adjustments

Summary of Adjustments is a document or section within financial statements detailing any adjustments made to initial financial records to ensure their accuracy and alignment with accounting principles.

Missing Items

Refers to items that are unaccounted for due to loss, theft, error, or omission in an inventory or collection of assets.