Carolina Potato Inc. currently sells cut sweet potatoes for $.85 per can. The cost of producing the sweet potatoes is $.18 per can. Carolina Potato is considering starting a line of mashed sweet potatoes. The additional processing costs would be $.06 per can and each can would sell for $.95. Which of the following pieces of information is not relevant to the decision to sell or process further?

Question

Quizplus · Accepted Answer

The production cost of $.18 per can is a sunk cost, meaning it has already been incurred whether or not Carolina Potato decides to process the sweet potatoes further. Therefore, it is not relevant to the decision of whether to sell the sweet potatoes as is or to process them further into mashed sweet potatoes. The decision should be based on additional costs and benefits that occur as a result of the further processing.