Chapter 25, Problem 7DQ

To determine

Concept Introduction:

Relevant costs are the costs that are relevant for any decision making. Relevant costs are helpful for take managerial decisions like make or buy, accept or reject new offers, sell or further process etc.

Two basic types of the relevant costs are as follows:

1. Out-of-pocket costs
2. Opportunity costs

Sunk Costs:

Sunk Costs are cost incurred in past which are irrelevant for the decision making.

To Discuss:

Sunk costs and why these costs are irrelevant for the decision making related to sell or process further.