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. Non-recurring
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 to 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. ______cost 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.

Answer 1

Answer:

The correct answers are the following:

a - 4 Sunk

b - 5 Opportunity

c - 3 Fixed

d - 2 Variable

e - 6 Incremental

f - 1 Recurring

g - 7 Direct

h - 8 Non-recurring

Explanation:

a) Sunk costs are those that have already occurred in the past and they can not be recovered again so therefore that they are not relevant at the time of taking decisions regarding the futue.

b) Opportunity costs are those that try to measure and show the sacrifice done at the time of making a decision when that sacrifice represents the best second option that the person could have done.

c) Fixed costs are those that are always the same amount and do not change with the activity level of the production of the company.

d) Variable costs are those that do change with the amount of activity level that the company has during the production process.

e) Incremental costs are those that increase the cost level of the production while the output level increases as well, so they are a concept on the margin.

f) Recurring costs are those that tend to repete continously in the production process so the company already know how much the amount of the cost is.

g) Direct costs are those that the company associates with the production process regarding the commodities and all the primary sources that are needed to produce the good and therefore that they impact directly in the production and in the cost of the final product.

h) Non-recurring costs are those that the company are not familiar with due to the fact that they do not repete often and therefore tend to happen once in a while.