Karl Kady, the controller of a nation wide manufacturing company is considering closing a plant in Texas. The plant manufactures containers for their products. All of the following would be relevant except
A) Costs paid for material on hand
B) Opportunity cost of alternative uses for the plant
C) Costs to buy externally
D) All of the above are relevant

Question

Quizplus · Accepted Answer

Costs paid for material on hand are considered sunk costs and are not relevant to the decision about closing a plant. Relevant costs are those that will change as a result of the decision, such as opportunity costs of alternative uses for the plant and costs to buy externally.

Karl Kady, the Controller of a Nation Wide Manufacturing Company