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Unformatted text preview: 15-415-9 Suppose a company is deciding whether to sell a product "as is" orprocess it further into a different product. Processing it further mayrequire additional equipment, so the company may have to purchase theequipment. In this case, the company's fixed costs would increase bythe amount of depreciation expense on the purchased equipment, sodepreciation expense, a fixed cost, would be an incremental cost.15-10 It might be valuable to distinguish between relevant fixed costs andrelevant variable costs for a short-term decision because theevaluation of the decision alternatives may depend on the expectedvolume of the operations being considered. For example, in a decisionwhether or not to discontinue a product, separating avoidable variablecosts from avoidable fixed costs helps the company find the salesvolume below which discontinuing is preferable and above which...
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This note was uploaded on 04/08/2008 for the course ACC 102 taught by Professor Drucker during the Fall '07 term at Coastal Carolina University.
- Fall '07