Wayne Company spent $13000 to produce Product 612 which can be sold as is for $15000 or processed further incurring additional costs of $11500 and then be sold for $17000. Which amounts are relevant to the decision about Product 612?

Question

Quizplus · Accepted Answer

The relevant costs are those that will change based on the decision at hand. Here, the decision is whether to sell now or process further and then sell. The initial production cost ($13000) is a sunk cost and does not affect the decision. The relevant figures are the current sale price ($15000), the additional processing cost ($11500), and the potential sale price after further processing ($17000).

Wayne Company Spent $13000 to Produce Product 612 Which Can