A graph comparing locked-in costs with incurred costs will have ________.
A) locked-in costs rising much faster initially, but dropping to zero after the product is manufactured
B) the two cost lines running parallel until the end of the process, when they join
C) locked-in costs rising much faster initially than the incurred cost, but joining the incurred cost line at the completion of the value-chain functions
D) no differences unless the product is manufactured inefficiently

Question

Quizplus · Accepted Answer

Locked-in costs are the costs that are incurred early in the product development process, such as the cost of product design, tooling, and equipment. These costs rise rapidly in the initial stages of product development and then level off over time. On the other hand, incurred costs are the costs that are incurred during the production of the product, such as labor, materials, and overhead costs. Incurred costs tend to rise gradually as production increases. Therefore, a graph comparing locked-in costs with incurred costs will show the locked-in costs rising much faster initially than the incurred cost, but joining the incurred cost line at the completion of the value-chain functions.

A Graph Comparing Locked-In Costs with Incurred Costs Will Have