Which one of the following costs was incurred in the past and cannot be recouped

Question

Which one of the following costs was incurred in the past and cannot be recouped?

Incremental

Sunk

Opportunity

Erosion

A university converted the bottom 3 floors of an apartment building they own to classrooms. The option that is forgone so that the university can utilize it for classroom is

A. Salvage value

B. Sunk cost

D. Opportunity cost

E. Erosion

Which one of the following best describes the concept of erosion?

expenses that have already been incurred and cannot be recovered

the cash flows of a new project that come at the expense of a firm's existing cash flows

the alternative that is forfeited when a fixed asset is utilized by a project

the differences in a firm's cash flows with and without a particular project

The depreciation is best defined as the:

amount of tax that is saved when an asset is purchased.

allocation of the cost of the asset over its useful life.

amount of tax that is due when an asset is sold.

amount by which depreciation expense lowers net income.

Which one of the following best illustrates erosion as it relates to a hot dog stand located on the beach?

providing both ketchup and mustard for its customer's use

selling fewer hot dogs because hamburgers were added to the menu

offering French fries but not onion rings

losing sales due to bad weather

Which of the following should be included in the analysis of a new product?
I. Money already spent for research and development of the new product
II. Reduction in sales for a current product once the new product is introduced
III. Increase in accounts receivable needed to finance sales of the new product
IV. market value of a machine owned by the firm which will be used to produce the new product

I and III only

II and IV only

I, II, and III only

II, III, and IV only

I, II, III, and IV

Increasing which one of the following will increase the operating cash flow assuming that the bottom-up approach is used to compute the operating cash flow?

Erosion effects

Taxes

Fixed expenses

Salaries

Depreciation expense

When a firm is evaluating the introduction of a new product, it should consider the impact of the product on

the financing costs required to bring the product to market

the firms additional overhead required during the production process

competing products the firm produces

the firm

Explanation / Answer

1) Sunk cost

2) D. Opportunity cost

3) The cash flows of a new project that come at the expense of a firm's existing cash flows.

4) Allocation of the cost of the asset over its useful life.

5) selling fewer hot dogs because hamburgers were added to the menu

6) II and IV only

7) Depreciation expense

8) Competing products the firm produces

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