CAF-5 · Chapter 14 · Question 7 of 10
Which of the following costs should ALWAYS be treated as irrelevant when evaluating a short-term pricing decision for a special order?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Sunk costs and absorbed general fixed overheads
Explanation
Sunk costs are past costs that cannot be changed. Absorbed general fixed overheads are arbitrary allocations of costs that will be incurred regardless of the decision. Both are completely irrelevant to short-term decision making.
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