Question

What is an example of a conceptual question in managerial accounting?

Answer 1

Sunk cost is one of the examples of the conceptual questions in managerial costing.

Sunk cost is the cost that has already been incurred in the past and now in decision making, they are not relevant because they are not recoverable.

For example, X has spent $5,000 in conducting a market survey to know if their products will sell or not. However, it was found that the project should not be continued because it will result in losses. Therefore, $5,000 spent already is not relevant because it has already been paid and will not be recovered in future.

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