GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which of the following is not a relevant cost in capital budgeting?
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Sunk cost
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Allocated overheads
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Both (a) and (b)
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Opportunity cost
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Explanation:
Detailed explanation-1: -Allocation of overheads means charging a cost center with such overheads which can be identified and measured. Such allocated overheads are irrelevant as already charged to cost center.
Detailed explanation-2: -Replacement cost is one of the firm’s relevant costs because a firm can avoid them by taking good care of its equipment and machinery.
Detailed explanation-3: -Answer and Explanation: A sunk cost will never be a relevant cost because it will always be there regardless of the alternative chosen.
Detailed explanation-4: -The correct option is ii. inventory level.
There is 1 question to complete.