Answered: cost approach limitations the economic…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Q45

Under which of the following cost approach limitations the economic value of human resources increases over time as the people gain experience but the capital cost diminishes through amortization process and hence becomes difficult to reconcile it.

Standard cost

Replacement cost

Opportunity cost

Historical cost

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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