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

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

Which of the following terms refers to the costs that are eliminated if a segment is eliminated?

Allocated costs

Sunk costs

Avoidable costs

Committed costs

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Verified step by step guidance

Understand the concept of avoidable costs: These are costs that can be eliminated if a specific segment, product, or activity is discontinued. They are directly tied to the existence of the segment and do not persist once the segment is removed.

Differentiate avoidable costs from other types of costs: For example, sunk costs are past costs that cannot be recovered and are irrelevant to future decisions. Allocated costs are distributed costs that may not necessarily disappear with the elimination of a segment. Committed costs are long-term fixed costs that cannot be easily changed or avoided.

Analyze the problem statement: The question asks which costs are eliminated if a segment is eliminated. Based on the definitions, avoidable costs fit this description as they are directly tied to the segment and cease to exist when the segment is removed.

Review the options provided: Allocated costs, sunk costs, avoidable costs, and committed costs. Compare each term to the definition of avoidable costs to confirm the correct answer.

Conclude that avoidable costs are the correct term because they represent costs that are eliminated when a segment is discontinued, unlike the other options which either persist or are irrelevant to the decision.