The total cost method determines a selling price equal to a product's total costs plus a desired profit on the product.

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True or False

A company paid $200,000 ten years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $10,000 per year. The company is considering using the machine in a new project that will have incremental revenues of $28,000 per year and annual cash expenses of $20,000. In analyzing the new project, the $200,000 original cost of the machine is an example of a(n):

Multiple Choice

• Incremental cost.
• Opportunity cost.
• Variable cost.
• Sunk cost.
• Out-of-pocket cost.

The concept of incremental cost is the same as the concept of differential cost.

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True or False

Additional costs incurred if a company pursues a certain course of action are sunk costs.

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True or False