Graphic analysis of incurred and locked-in costs provides several insights as to how the different concepts influence decisions.Which of the following statements is FALSE?
A)When and how costs are locked in are more important than when and how costs are incurred.
B)Costs are generally locked in before they are incurred.
C)Most costs are locked in during the manufacturing process.
D)After a product's design has been approved,costs are difficult to influence.

Question

Quizplus · Accepted Answer

This statement is false as most costs are locked in before or during the design phase, rather than during the manufacturing process. Therefore, option C is incorrect. Option A is true as decision-makers aim to lock in costs at the earliest possible stage to reduce uncertainty, and the timing of when and how costs are locked in often has a larger impact on decisions than the timing of when costs are incurred. Option B is also true as many costs, such as those related to suppliers or equipment purchases, are locked in before they are incurred. Option D is also true as costs related to a product's design, such as tooling or materials, are often difficult to influence once the design is approved.

Graphic Analysis of Incurred and Locked-In Costs Provides Several Insights