The cost of obsolete inventory acquired several years ago, to be considered in a keep vs. disposal decision is an example of :
Correct answer: B. Sunk cost
- A. Uncontrollable cost
- B. Sunk cost
- C. Avoidable cost
- D. Opportunity cost
Explanation
The inventory cost was incurred several years ago and cannot be changed by the current keep-or-dispose decision, so it is a sunk cost. Avoidable and opportunity costs are relevant future costs, not past costs already incurred.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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