Sunk costs are ignored in decision making but information about sunk costs are usually found in the financial statements and accounting records. Opportunity costs however are not included in the financial statements of companies. Explain this.

Sunk costs are ignored in decision making but information about sunk costs are usually found in the financial statements and accounting records. Opportunity costs however are not included in the financial statements of companies. Explain this.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 21Q: Discuss the concept of controllable and uncontrollable costs and how they affect the evaluation of...

See similar textbooks

Related questions

Q: Traditional accounting systems record only actual transac-tions. As a result, how can opportunity…

A: Financial Accounting: It refers to the process of recording the financial transactions of the…

Q: Fixed costs are distributed, what is the profitability of the remaining services if the company…

A: Introduction:- Fixed costs are cannot be avoided. Fixed costs are distributed remaining…

Q: Challenges with how direct costs are distributed to cost objects in different companies can give…

A: As the proprietor of a startup or independent company, there are critical perspectives you ought to…

Q: Allocating common fixed expenses to business segments: may cause managers to erroneously keep…

A: Common fixed expenses are that expenses which support more than one operating segment but not…

Q: Managers often assume a strictly linear relationship between cost and the level of activity.How can…

A: The managers often assume the strictly linear relationship between the cost and the level of…

Q: THE MAIN DIFFERENCE BETWEEN EX-ANTE AND EX-POST ECONOMIC PROFIT a. Representing the opportunity…

A: b. is called the hold-up problem

Q: Costs that can be eliminated in whole or in part if a particular business segment is discontinued…

A: Opportunity Cost: Opportunity cost refers to the foregone revenue that could have been generated…

Q: True or False Cost and managerial accounting are not the same things

A: Cost accounting is the process of accounting and controlling the cost of a product,operation or…

Q: Which statement below best describes a profit center?a. The authority to make decisions affecting…

A: Answer c. The authority to make decisions over the most significant costs of operations, including…

Q: Break-even analysis is of limited use to management because a company cannot survive by just…

A: Breakeven analysis involves comparison of fixed cost, variable cost and sales price to derive the…

Q: “Management accounting deals only with costs.” Do you agree? Explain?

A: Management accounting is wide field which encompasses cost computation, pricing analysis,process…

Q: Which of the following statements is true regarding a company's segment margin? It is primarily used…

A: Solution: The true statement regarding a company's segment margin is that "It is primarily used to…

Q: Which of the following is NOT true about the cause-and-effect criterion when estimating a cost…

A: The cause and effect analysis is one of the factors for making cost allocation decisions. The cost…

Q: Why can full cost accounting lead to wrong management decisions?

A: Full cost accounting says that total costs of the product either it is fixed costs or it is variable…

Q: Why do many operating managers prefer a contribution income statement instead of a traditional…

A: Traditional income statement: Traditional income statement is a financial statement that shows the…

Q: Which of the following statements is most correct about step costs? they have the same behaviour…

A: Marginal costing is the one by which the cost of additional unit production is calculated. Under…

Q: Which of these costs is considered as the most important cost because if it is not met, an…

A: A company income statement will report the net income as the total revenue in excess of the total…

Q: Explain the concept of a contribution margin and describe how it differs from gross margin. Also,…

A: Contribution Margin represents the incremental money generated for each product/unit sold after…

Q: without and effective system of cost accounts it is doubtful whether can survive in the intensely…

A: Cost accounting is the accounting of cost which collects all data from different sources and after…

Q: Making managerial pay contingent on measures of managerial and/or firm performance motivates them to…

A: Performance Base Pay: When compensation is based on the fact that the employee has achieved the…

Q: How cost accounting is useful where financial accounting could not be answered. Give any exampleto…

A: Accounting is primarily concerned with identifying, recording, measuring, summarizing transactions…

Q: 1- When is a revenue or cost item relevant for a particular decision?

A: Hi student Since there are multiple questions, we will answer only first question. If you want…

Q: The chairman of the board of directors of the company for which you are chief accountant has told…

A: Given case is: The chairman of the board of directors of the company for which you are chief…

Q: Which of the following costs are irrelevant to business decisions? Avoidable costs Costs that…

A: Sunk costs are irrelevant to business decisions.

Q: Which of the following is one of the difference between management accounting and cost accounting…

A: Management accounting and cost accounting are two branches of accounting. Under management…

Q: Which of these is not an objective of Cost Accounting? O a. Ascertainment of Cost O b. Cost Control…

A: Cost accounting means where every cost of doing business is recorded in necessary account and cost…

Q: Which of the following statements is true? (You may select more than one answer.)a. A common cost is…

A: Opportunity cost is the value of the next best alternative over the selected alternative.The loss of…

Q: Explain why, for large corporations, we should expect a low pay-performance relationship

A: In accounting pay performance relationship refers to the relationship between pay level of employees…

Q: “A company should not allocate costs that are fixed in the short run to customers.” Do you agree?…

A: Cost Allocation:The process of assigning the cost to the cost object is cost allocation. The cost…

Q: When making decisions, managers should consider a. revenues that differ between alternatives. b.…

A: The explanation for the given options: a. A manager on the verge of making decisions must consider…

Q: In Classification Of Cost (Marginal costs) What Is A Business Situational Example of the ff:…

A: Cost is the amount which is spend to sold the goods or to provide the service. It is comprises of…

Q: A department that incurs costs but does not generate revenue is calleda(n) (a) profit center.(b)…

A: The cost center represents the unit of the business that does not generate revenue but incurs cost…

Q: a cost that is irrelevant when making managerial decision O fixed cost O opportunity cost O…

A: Cost means the amount spent on doing some business or activity.

Q: Which of the following costs are irrelevant to business decisions? a. Avoidable costs b. Costs that…

A: Irrelevant cost: Irrelevant cost does not affect the decision making since they are not in the…

Q: In Classification Of Cost, What Is A Business Situational Example of the ff:

A: Cost refers to the amount spent by the business on the purchase of raw materials, supplies,…

Q: Companies benefit greatly from the use of a standard cost system, and the statement

A: This question deals with the use of a standard cost system, and the statemen

Q: Describe the differences in behavior of fixed costs, variable costs, semi-variable costs and step…

A: Fixed costs are fixed in nature, it doesn't vary with the change in units. The total fixed cost will…

Q: Explain why the majority of businesses use full-costing systems whilst most management accounting…

A: Full Costing:- Full costing is a method of accounting where it accounts for all costs, both fixed…

Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Which of the following costs are irrelevant to business decisions? Avoidable costs Costs that differ between alternatives Sunk costs Variable costs
Which of the following is NOT a period cost? Select one: O a. manufacturing costs. Ob general and administrative costs. Oc marketing costs. Od. research and development costs. Which of the following is NOT one of the questions management accountants might attempt to help answer in the formulation of strategy? Select one: a. What substitute products exist in the marketplace? Ob. Who are our most important customers? Does the strategy comply with GAAP (Generally Accepted Accounting Principles)? Od. Will adequate cash be available to implement the strategy?
Which of the following statements is false? Multiple Choice In general, the term expense is used for managerial purposes, while the term cost refers to external financial reports. An opportunity cost is the benefit forgone by selecting one alternative over another. An outlay cost is a past, present, or future cash outflow. A cost is a sacrifice of resources.
What are some examples on the types of costs that the accounting systems might not record but companies do consider?
In Classification Of Cost (Marginal costs) What Is A Business Situational Example of the ff: Marginal costs Differential/Incremental costs Opportunity costs Relevant cost Replacement cost Shutdown cost Capacity cost Sunk cost
Differential costs represent – Group of answer choices the costs which is shown in the balance sheet but not expensed in the income statement until the sale of the products. The differences in costs among different departments of an organization. the amount of increase or decrease in costs from a particular course of action when compared to its alternatives the difference between controllable costs and non-controllable costs.
How cost accounting is useful where financial accounting could not be answered. Give any exampleto support your answer.
Which of the following statements is true? (You may select more than one answer.)a. A common cost is one type of direct cost.b. A sunk cost is usually a differential cost.c. Opportunity costs are not usually recorded in the accounts of an organization.d. A particular cost may be direct or indirect depending on the cost object.
"Simplification of all costs into only fixed and variable costs distorts the actual cost behavior pattern of a firm. Yet businesses rely on this method of cost classification." Comment
Why do companies allocate costs? What are some of the advantages and disadvantages to doing so?
In Management Accounting, what is the transfer price? What three areas does transfer price affect in managerial accounting? How are transferred prices determined? plagiarsm not allowed
How the system of cost accounting has overcome the limitations of financialaccounting. Explain it by pointing out the different limitations of financialAccounting.