Managers should only consider incremental revenues and incremental separable costs in a sell-or-process-further decision.

Question

Quizplus · Accepted Answer

When making a sell-or-process-further decision, managers should only consider the additional revenue that would be earned and the additional costs that would be incurred by processing the product further. These incremental revenues and expenses are known as incremental separable costs. Any sunk costs or fixed costs that do not change regardless of the decision should not be factored into the decision-making process.

Managers Should Only Consider Incremental Revenues and Incremental Separable Costs