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Questions
Distinguish between shut down cost and sunk cost.
Give one difference between shut down cost and sunk cost.
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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.
RELATED QUESTIONS
Variable cost is a cost that ______.
Total variable cost per unit increases ______.
The cost remains same at all levels of output is called ______ cost.
It refers to the expenses incurred on those items which are not directly chargeable to production. Salaries of timekeeper, foremen and watchmen are examples of this cost. This cost is incurred for the concern as a whole rather than a particular product.
Which of the following best describes a fixed cost?
Distinguish between direct costs and indirect costs.
Fixed cost is a cost which ______.
Variable cost per unit increases when ______.
"Some costs are semi-variable in nature." Comment.
Explain with an example the meaning of variable costs.
