ACCA · Question 08 · Decision-making Techniques
Section A
GlobalBuild is evaluating whether to continue a cross-border construction project. They have already spent $500,000 on initial architectural designs. They have also signed a legally binding contract to lease specialized cranes for $100,000, which must be paid regardless of whether the project continues.
In the context of relevant costing for the decision to continue the project, which TWO of the following statements are correct?
Answer options:
The $500,000 spent on designs is a sunk cost and is not relevant.
The $500,000 spent on designs is an opportunity cost and is relevant.
The $100,000 crane lease is a committed cost and is not relevant.
The $100,000 crane lease is an avoidable fixed cost and is relevant.
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