Costs

Question 1

What is the definition of opportunity cost?

A Opportunity cost is the benefit received from using money

B Opportunity cost is the total benefits given up from using money

C Opportunity cost is the next best option foregone from using money

D Opportunity cost is the sum of all options foregone from using money

Answer 1

C

Question 2

How should businesses consider sunk costs when making a business decision?

A Sunk costs should be considered by themselves

B Sunk costs should be added to opportunity costs

C Sunk costs should be compared with opportunity costs

D Sunk costs should be ignored

Answer 2

D

Question 3

Which of the following is most likely an example of a variable cost?

A Rent

B Direct material

C Corporate overhead

D Advertising

Answer 3

B

Question 4

Which of the following is most likely an example of a fixed cost?

A Rent

B Direct material

C Direct labor

D Supplies

Answer 4

A

Question 5

What is the definition of an indirect cost?

A A cost that cannot be easily measured

B A cost that does not vary with levels of production

C A cost that cannot be attributed to production

D A cost that is at the discretion of management

Answer 5

C