Which of the Following Statements Regarding the Valuing of Costs

question 48

Multiple Choice

Which of the following statements regarding the valuing of costs and benefits is NOT correct?

• A)The first step in evaluating a project is to identify its costs and benefits.
• B)Competitive market prices allow us to calculate the value of a decision without worrying about the tastes or opinions of the decision maker.
• C)Because competitive markets exist for most commodities and financial assets, we can use them to determine cash values and evaluate decisions in most situations.
• D)In the absence of competitive markets, we can use one-sided prices to determine exact cash values.

---

Definitions:

Overhead Allocation

The process of distributing indirect costs to products, services, or departments based on relevant allocation bases.

Cost-Based Pricing

A strategy for setting prices where a specific additional amount is added to the product's unit cost to determine the sale price.

Underpriced Products

Items sold at a price below their market value or cost of production, potentially leading to losses or reduced profit margins for the seller.

Absorption Cost

A method of costing that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overhead) in the cost of a product.