In deciding whether to sell a product or to process it further, which of the following costs are relevant to the decision?

Question

Quizplus · Accepted Answer

The costs that are relevant to the decision of whether to sell a product or to process it further are the costs incurred to process further. These costs are typically incremental costs incurred to produce the finished product from the partially-completed unit. The costs that have already been incurred (such as material costs and overhead costs) are sunk costs and should not be considered in the decision-making process. Direct materials and direct labor costs are also typically relevant costs, as they are variable costs that change with the level of production.

In Deciding Whether to Sell a Product or to Process