Given below is a numbered list of cost terms. For each of the definition stateme

Question

Given below is a numbered list of cost terms. For each of the definition statements that follow, place the number of the cost term in the blank that makes the statement a correct definition. Each cost term is used only once.

Number List of Cost Terms:

1. Recurring; 2. Variable; 3. Fixed; 4. Sunk;

5. Opportunity; 6. Incremental; 7. Direct; 8. Nonrecurring

A_____   costs are those that have occurred in the past and have no relevance to estimates of future costs and revenues.

B_____    costs are incurred because of the use of limited resources such that the ability to use those resources to monetary advantage in another way is foregone.

C_____    costs are those which are unaffected by changes in activity level over a feasible range of operations for the capacity available.

D_____    costs, in total, change in relation to the quantity of output or other measures of activity level.

E_____    cost refers to the additional cost that will result from increasing the output of a system by one or more units.

F_____    costs are those that are repetitive and occur when goods or services are produced on a continuing basis.

G_____    costs can be reasonably measured and allocated to a specific output or work activity.

H_____    costs are not repetitive even though the total expenditure may be cumulative over a relatively short period of time.

Explanation / Answer

A- 4 (Sunk cost), because it is non recoverable

B- 5 (opportunity cost), because it is incurred with the use of limited resources

C- 3 (fixed cost), because it don't change with activity level

D- 2 (variable cost), because it changes in total as units increases

E- 6 (incremental cost), because it is incurred by the production of one more unit

F- 1 (recurring cost), because it is repetitive

G- 7 (direct cost), because it can be allocated to specific item

H- 8 (non recurring cost), because it is not repetitive

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