A department accepts a new order from a customer. It has already incurred £100 for design costs. It has also incurred costs of £200 for visits by sales staff. If the order is accepted a quality inspector will be transferred from another department. The inspector earns £20,000 per year. If the order is accepted there will be additional training costs of £700.
-In this decision the differential costs total:
A)£0.
B)£300.
C)£20,700.
D)£700.

Question

Quizplus · Accepted Answer

The differential costs are the additional costs incurred if the order is accepted. These include the training costs of £700. The design and sales costs are sunk costs and the inspector's salary is not an additional cost since they are already employed.

A Department Accepts a New Order from a Customer