In a Sell or Process Further Decision, Consider the Following

question 216

Multiple Choice

In a sell or process further decision, consider the following costs:A variable production cost incurred prior to split-off.A variable production cost incurred after split-off.An avoidable fixed production cost incurred after split-off.Which of the above costs is (are) not relevant in a decision regarding whether the product should be processed further?

• A) Only I
• B) Only III
• C) Only I and II
• D) Only I and III

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Definitions:

Inflationary Price Increase

The rise in prices of goods and services over time, typically due to an increase in the money supply or demand outpacing supply.

Reconciled

The process of making sure that two sets of records (usually the balances of two accounts) are in agreement.

Step-fixed Costs

Costs that remain fixed over a range of activity, but jump to a higher level of expense at certain points when activity levels require it.

Variable Cost

Costs that vary directly with the level of production output or business activity, such as materials and labor directly involved in producing a product.