20.3. Other Special Types of Costs

Try these first

1. 1.

   What is opportunity cost?

   Hint

   Think about a situation where you choose between two job offers.

2. 2.

   Define sunk cost.

   Hint

   Relate it to past investments.

3. 3.

   What does opportunity cost refer to?

   • Benefit from choosing an alternative
   • Cost incurred that cannot be recovered
   • Additional cost from producing more

   Hint

   Think about what you give up.

4. 4.

   True or False: Sunk costs should influence future financial decisions.

   • True
   • False

   Hint

   Consider a scenario where a company invests in additional training.

5. 5.

   A company has spent ₹100,000 on research and development for a product that was supposed to launch. However, market conditions have changed, and they foresee a better opportunity in an alternative product. How should they account for the ₹100,000 in their decision-making?

   Hint

   Consider which costs are recoverable.

6. 6.

   A bakery calculates that to produce an additional batch of cookies, this incurs ₹200 in raw materials and labor. However, signing a new contract for a larger order means increased production costs. Calculate the marginal cost and assess if production should be increased.

   Hint

   Review pricing strategies and profit margins.