A factory is operating at less than 100% capacity.Potential additional business will not use up the remainder of the plant capacity.Given the following list of costs, which one should be ignored in a decision to produce additional units of product?
A)variable selling expenses
B)fixed factory overhead
C)direct labour
D)contribution margin of additional units

Question

Quizplus · Accepted Answer

Fixed factory overhead is a sunk cost and should be ignored in decision-making since it will not change based on the decision to produce additional units. The variable selling expenses, direct labor, and contribution margin of additional units are all relevant costs that should be considered in the decision.

A Factory Is Operating at Less Than 100% Capacity