Which Cost Is Incurred Even If The Company Is Closed?

If you have landed on this page and looking an answer for the question which cost is incurred even if the company is closed then we got you. 

Keep reading as we discuss the answer as well as the meaning of all of the 4 costs.

Which Cost Is Incurred Even If The Company Is Closed?

Shutdown cost is the cost that will be incurred even if the company is closed and not working anymore.

There were other options given to this question as well that are imputed cost, historical cost, and sunk cost but the right answer is shutdown cost.

Now that you got to the right answer for your question let’s find out the meaning of each of these costs.

what is shutdown cost?

A shutdown cost is a financial term that refers to the costs incurred when a business operation is shut down. 

These costs can include severance pay, the cost of closing down facilities, and any other expenses associated with shutting down a business. 

Shutdown costs can be significant, and can often be a deciding factor in whether or not a business is able to stay afloat.

what is imputed cost?

Imputed cost is a term used in economics to refer to the value of something that is not directly observable. 

This might include the value of a good or service that is not traded in the market, or the value of a benefit that is not directly observable. 

Imputed cost is often used in estimating the value of goods and services that are not traded in the market, such as the value of a home or the value of a person’s time.

what is historical cost?

Historical cost is the original purchase price of an asset. This amount is recorded on the balance sheet and is not updated for inflation or other changes in the purchasing power of money. 

Historical cost is used in accounting and financial reporting. The historical cost principle states that assets should be reported on the balance sheet at their original purchase price, and not be adjusted for inflation or other changes in the purchasing power of money. 

This principle is used in order to maintain consistency in financial reporting.

What is sunk cost?

Already spent money is considered a sunk cost since it can’t be recovered. Sunk costs are often used as a decision-making tool, as they should not be considered when making future decisions. 

For example, if a company has already invested $1 million in a project, that money is a sunk cost. The company should not consider this cost when deciding whether or not to continue with the project, as it has already been spent and cannot be recovered. 

Thoughts!

So which cost is incurred even if the company is closed? The answer is shutdown cost. Hope you have read the meaning of other costs as well so that you will have a better understanding of what each costs mean.