How Are Sunk Costs and Fixed Costs Related

question 42

Multiple Choice

How are sunk costs and fixed costs related?

• A)They are not related in any way.
• B)Sunk costs cannot be recovered and fixed costs can be avoided by shutting down.
• C)In the short run they are equal to each other.
• D)In the long run they are equal to each other.

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Definitions:

Transfer of Accounts Receivable

The process of selling or assigning the right to collect on outstanding invoices to another party.

Transferee

An individual or entity that receives the transfer of assets, rights, or interests from another party.

Transferor

The entity or person that transfers assets, obligations, or rights to another party.

Allowance Method

An accounting technique that estimates and deducts accounts receivable that are not expected to be collected to better represent net realizable values.