In a sell or process further decision,consider the following costs:
I.A variable production cost incurred prior to split-off.
II.A variable production cost incurred after split-off.
III.An avoidable fixed production cost incurred after split-off.
Which of the above costs is (are)not relevant in a decision regarding whether the product should be processed further?
A) Only I
B) Only III
C) Only I and II
D) Only I and III

Question

Quizplus · Accepted Answer

Costs incurred prior to the split-off point are sunk costs and are not relevant to the decision of whether to process a product further. Costs incurred after the split-off point, whether variable or avoidable fixed, are relevant as they can be influenced by the decision.

In a Sell or Process Further Decision,consider the Following Costs