Question

Which of the following is not relevant in a special order decision?

		Variable costs.
		Opportunity costs.
		Sunk costs.
		Avoidable fixed costs.
		None of the answer choices is correct.

Answer 1

Sunk cost is not relevant in a special order decision. Sunk cost is the cost which is incurred in some past time period. Since it has already been incurred, hence it is not a decision making cost.

Ex- In case of machinery replacement decision, the book value of existing machine is a sunk cost. It will not considered while deciding about whether to continue with the existing machine or replace it with a new machine.

Variable cost, Opportunity costs, Avoidable fixed costs are relevant in a special order decision.

Third option is correct.

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