A company is trying to decide whether to keep or drop the organic foods department in its grocery store.If organic foods are dropped, the manager will be laid off.What is the manager's salary in relation to the decision to keep or drop the department?
A)An opportunity cost and therefore relevant
B)Avoidable and therefore incremental
C)Sunk and therefore not relevant
D)The same for all alternatives and therefore not relevant

Question

Quizplus · Accepted Answer

The manager's salary is avoidable and therefore incremental because if the department is dropped, the company can avoid paying the manager's salary. This makes it relevant to the decision.

A Company Is Trying to Decide Whether to Keep or Drop