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Questions
Distinguish between shut down cost and sunk cost.
Give one difference between shut down cost and sunk cost.
Distinguish Between
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Solution
- Shutdown costs are caused by temporary difficulties, such as a shortage of raw materials, whereas sunk costs result from past decisions that cannot be altered.
- While no work is done during the shutdown, fixed costs must still be paid; in contrast, work is done during the sunk cost period.
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Classification of Costs
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