Which of the Following Statements Is CORRECT

question 40

Multiple Choice

Which of the following statements is CORRECT?

• A) a sunk cost is any cost that was expended in the past but can be recovered if the firm decides not to go forward with the project.
• B) a sunk cost is a cost that was incurred and expensed in the past and cannot be recovered if the firm decides not to go forward with the project.
• C) sunk costs were formerly hard to deal with but now that the npv method is widely used, it is possible to simply include sunk costs in the cash flows and then calculate the pv of the project.
• D) a good example of a sunk cost is a situation where home depot opens a new store, and that leads to a decline in sales of one of the firm's existing stores.
• E) a sunk cost is any cost that must be expended in order to complete a project and bring it into operation.

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Definitions:

Purchases Returns and Allowances

From the buyer’s perspective, returned merchandise or an adjustment for defective merchandise.

Periodic Inventory System

An inventory accounting system where updates are made on a periodic basis rather than continuously.

Condensed Income Statements

Simplified financial statements that present a summary of a company's revenue, expenses, and profitability over a particular period.

Merchandising Companies

Companies that purchase goods in a finished condition and resell them at a profit without further processing.