Moreland Clean Company spent $8,000 to produce Product 89, which can be sold as is for $10,000, or processed further incurring additional costs of $3,000 and then be sold for $14,000. Which amounts are relevant to the decision about Product 89?

Question

Quizplus · Accepted Answer

The relevant costs are the ones that will change based on the decision at hand. The $8,000 is a sunk cost and does not affect the decision to process further or sell as is. The decision revolves around whether to accept the additional $3,000 cost to potentially increase sales from $10,000 to $14,000.

Moreland Clean Company Spent $8,000 to Produce Product 89, Which