Question

In making "sell as is" decisions, companies should consider all of the following EXCEPT for:

a. costs incurred up to the "sell as is" decision point
b. incremental costs that would be incurred by processing further
d. all of the above should be considered

Answer 1

In 'sell as is' decisions, companies should consider all costs except for sunk costs, which are past expenses that cannot be recovered. This includes not considering fixed costs that were spent before starting production as they are sunk and should not influence current or future decisions.

Step-by-step explanation:

When making "sell as is" decisions, companies should consider all costs and benefits that will be affected by the decision. This includes incremental costs that would be incurred by processing further and the costs incurred up to the "sell as is" decision point. However, one should not consider sunk costs, as these are costs that have already been incurred and cannot be recovered. Sunk costs include fixed costs that were necessary before any production began such as research and development costs or capital investments. Therefore, when a firm is considering the "sell as is" option, it must ignore these sunk costs and instead focus on the future costs and benefits that are directly affected by the decision.