Question

In cost classification, which of the following represents the cost of an electronic guidance system installed in the airplane cockpit?

a) Fixed cost
b) Variable cost
c) Sunk cost
d) Direct cost

Answer 1

The cost of an electronic guidance system installed in an airplane cockpit is classified as a direct cost because it is directly attributable to the product being manufactured.

Step-by-step explanation:

In the context of cost classification within a business, the cost of an electronic guidance system installed in the airplane cockpit is best represented as a direct cost. A direct cost is a type of expense that is directly attributable to the product being manufactured, in this case, the airplane. Since the electronic guidance system is an integral component of the airplane's cockpit, the cost is directly associated with each unit produced, making it a direct cost.

It is important to note that this cost is not variable, as it does not change with the level of production once the system is installed. Moreover, it is not a sunk cost either, because a sunk cost refers to an expense that has already occurred and cannot be recovered, regardless of future actions.