Question

Since the costs of producing an intermediate product do not change regardless of whether the intermediate product is sold or processed further, these costs are not considered in deciding whether to further process a product.
a) true
b) false

Answer 1

Answer: a) true

Explanation:

The costs incurred to produce the intermediate products have already been incurred and as such are referred to as sunk costs.

They will not change regardless of whether the good is sold before further processing or if it is sold after. They therefore do not matter in the decision to either process or sell and so are not considered.