[amp_mcq option1=”Sunk Cost” option2=”Opportunity Cost” option3=”Allocated Overheads” option4=”Both A and C above” correct=”option2″]<\/p>\n
The correct answer is: Both A and C above<\/strong><\/p>\n A sunk cost is a cost that has already been incurred and cannot be recovered. For example, if a company has already spent $10 million on research and development for a new product, this cost is a sunk cost and should not be considered when making a decision about whether or not to launch the product.<\/p>\n An opportunity cost is the benefit that is forgone by choosing one alternative over another. For example, if a company is considering investing in a new project, the opportunity cost of this investment is the profit that the company could have earned by investing in another project.<\/p>\n Allocated overheads are costs that are assigned to a product or service based on some arbitrary allocation method, such as direct labor hours or machine hours. These costs are not directly traceable to the product or service and should not be considered when making a decision about whether or not to produce or sell the product or service.<\/p>\n In conclusion, both sunk costs and allocated overheads are not relevant costs in capital budgeting. Relevant costs are those costs that will change in the future as a result of a decision. Sunk costs and allocated overheads are not future costs and therefore should not be considered when making a capital budgeting decision.<\/p>\n","protected":false},"excerpt":{"rendered":" [amp_mcq option1=”Sunk Cost” option2=”Opportunity Cost” option3=”Allocated Overheads” option4=”Both A and C above” correct=”option2″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-58819","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n