A company is considering a new project that will cost $19,000.This project would result in additional annual revenues of $6,000 for the next five years.The $19,000 cost is an example of a(n):
A) Sunk cost
B) Fixed cost
C) Incremental cost
D) Uncontrollable cost
E) Opportunity cost

Question

Quizplus · Accepted Answer

The $19,000 cost is an incremental cost because it is the cost of a new project that will generate additional revenues. Sunk cost refers to costs that have already been incurred and cannot be recovered, fixed cost refers to costs that do not vary with the level of production, uncontrollable cost refers to costs that cannot be influenced by the management, and opportunity cost refers to the cost of forgoing the next best alternative.

A Company Is Considering a New Project That Will Cost