Unformatted text preview: make-or-buy are the variable manufacturing costs, the purchasing price and the opportunity costs. 11. In incremental analysis sunk costs are irrelevant because a sunk cost is defined as a cost that cannot be changed by any present or future decision. However, any trade-in allowance or cash disposal value of the existing asset is relevant since the value will not be realized if the asset remains in use. If an asset is retained, equipment or machine, the book value will be depreciated over its remaining useful life. Unless a company receives a new unit then the book value will be recognized as a loss. In retrospect, regardless of the replacement decision, the effect of the book value on current and future earnings is the same....
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- Spring '08
- Managerial Accounting, Variable manufacturing costs, Son Ly Company