Depreciation expense on existing factory equipment is usually irrelevant in a decision of whether to accept or reject a special offer for a company's product.

Question

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Depreciation expense on existing factory equipment is a sunk cost and should not be considered in a decision of whether to accept or reject a special offer for a company's product. The decision should be based on incremental costs and revenues that are directly affected by the special offer.

Depreciation Expense on Existing Factory Equipment Is Usually Irrelevant in a Decision