Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which of the following costs is irrelevant to business decisions?

Sunk cost

Variable cost

Opportunity cost

Incremental cost

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Verified step by step guidance

Understand the concept of 'irrelevant costs' in business decisions. Irrelevant costs are those that do not affect the decision-making process because they remain unchanged regardless of the decision made.

Define 'sunk cost.' A sunk cost is a cost that has already been incurred and cannot be recovered. Since it cannot be changed by any future decision, it is considered irrelevant to business decisions.

Compare sunk costs with other types of costs listed: Variable costs, opportunity costs, and incremental costs. These costs are typically relevant because they can change depending on the decision made.

Recognize that variable costs are costs that vary with production levels, opportunity costs represent the benefits foregone by choosing one option over another, and incremental costs are additional costs incurred when making a decision. All of these are relevant to decision-making.

Conclude that sunk costs are the only costs in the list that are irrelevant to business decisions because they do not influence future outcomes or decisions.