Final answer:
Derek's incremental analysis for a make-or-buy decision should include an opportunity cost of $4,000, which is the forgone net benefit from not producing and selling Item Z after buying Item X. The correct option is: c. $4,000.
Step-by-step explanation:
Derek is conducting incremental analysis for a make-or-buy decision regarding Item X. The key component of this analysis involves the concept of opportunity cost, which is the benefit foregone by choosing one alternative over another. In this scenario, if Derek decides to buy Item X, he will then have the capacity to produce Item Z, which would sell for $12,000 and incur production costs of $8,000. The opportunity cost in this case would be the net benefit lost from not producing Item Z, which is the potential revenue from selling it ($12,000) minus the costs to produce it ($8,000).
Derek's incremental analysis should include an opportunity cost of $4,000, which is the difference between the revenue he would earn from selling Item Z and the costs associated with its production. This is the net value that would be foregone if he chose to make Item X instead of buying it and using the capacity to produce and sell Item Z.