A company is trying to decide which product to manufacture.The following information is available:
$\begin{array}{lll}\text { Costs }&\text { Product A }&\text { Product B }\
\text { Direct Materials 1 } & \$ 2.00 \text { per unit } & \$ 2.20 \text { per unit } \
\text { Direct Materials 2 } & \$ 1.25 \text { per unit } & \$ 1.50 \text { per unit } \
\text { Direct Materials 3 } & \$ 0.50 \text { per unit } & \$ 0.80 \text { per unit } \
\text { Direct Labor } & \$ 0.70 \text { per unit } & \$ 0.70 \text { per unit }
\end{array}$
Which product cost is irrelevant to the decision?
A) Direct Materials 1
B) Direct Materials 2
C) Direct Materials 3
D) Direct Labor

Question

Quizplus · Accepted Answer

Direct Labor cost is irrelevant to the decision because it is the same for both Product A and Product B, making it a non-differential cost in the decision-making process.

A Company Is Trying to Decide Which Product to Manufacture