21. Even though costs, revenues and other factors do not vary among possible courses of action they may be relevant to a decision.
22. Sunk costs have already been incurred and cannot be changed by future actions.
23. The most common method to allocate joint costs is in proportion to the relative sales value of the products.
24. After January 1, 2009, in order to be consistent with IASB Standards, U.S. GAAP now requires that borrowing costs on assets that require a substantial period to bring them to a marketable condition be expensed immediately.
Multiple Choice Questions
25. A cost that has already been incurred and cannot be changed is called a(n):
A. Opportunity cost.
B. Out-of-pocket cost.
C. Joint cost.
D. Sunk cost.
26. Costs that have not yet been incurred and that may vary among different courses of action are called:
A. Opportunity costs.
B. Out-of-pocket costs.
C. Joint costs.
D. Sunk costs.
27. Incremental revenues:
A. Always increase revenue when one course of action is selected over another.
B. Always decrease revenue when one course of action is selected over another.
C. May increase or decrease when one course of action is selected over another.
D. Cause revenues to remain steady.
28. By choosing to go into business for himself, Jim Lazar foregoes the possibility of getting a highly paid job with a large company. This is called a(n):
A. Sunk cost.
B. Out-of-pocket cost.
C. Opportunity cost.
D. Joint cost.
29. In making a business decision, managers will look at:
A. Only quantitative information.
B. Only qualitative information.
C. Both A and B.
D. Neither A nor B.
30. Which of the following types of cost are always relevant to a decision?
A. Sunk costs.
B. Average costs.
C. Incremental costs.
D. Fixed costs.