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:

Physical

Relating to the body as opposed to the mind or emotions; involving biological or material properties.

Domain

An area of interest or a specific field of study or activity in which knowledge, expertise, or authority is applied.

Technological Advances

Improvements or innovations in technology that often lead to new products, processes, or methods in various fields.