Question

In a sell or process further decision, which of the following costs is relevant?
I. A variable production cost incurred after split-off.
II. A fixed production cost incurred prior to split-off.
a) Only I
b) Both I and II
c) Neither I nor II
d) Only II

Answer 1

Answer: a. Only I

Explanation:

In a sell or process further decision, the only cost that is relevant is the variable production cost that is incurred after split-off.

It should be noted that a split-off is when the parent company of an organization uses specified terms to divests its business unit