A graph comparing locked-in costs with incurred costs will have:
A)locked-in costs rising much faster initially than the incurred cost,but joining the incurred cost line at the completion of the value-chain functions.
B)locked-in costs rising much faster initially,but dropping to zero after the product is manufactured.
C)no differences unless the product is manufactured inefficiently.
D)the two cost lines running parallel until the end of the process,when they join.

Question

Quizplus · Accepted Answer

Locked-in costs are the costs that are incurred at the beginning of the value chain functions, while incurred costs are the costs that are incurred during the production process. Initially, the locked-in costs will rise much faster as they are associated with the design and development of the product. However, as the product moves through the value chain functions, the incurred costs will start to rise at a faster rate. Eventually, the two lines will join at the completion of the value chain functions. Therefore, option A is the correct answer.

A Graph Comparing Locked-In Costs with Incurred Costs Will Have