Stellar Packaging Products is considering diversifying its product line offerings into candy and other food bag packaging. This would require a major investment outlay for machinery and equipment. Give one example of different costs that would be considered relevant and one that would be considered irrelevant in making a future business decision for a company, and justify your choices.
For this discussion:
- Support your position.
- Select two peer posts and comment on the content of their posts. Does your selection differ from that of your peers? If so, how does that response contrast to your own?
ANS:
There are two types of cost that incur in any manufacturing process and they are variable and fixed costs.
Variable costs are those costs which vary with the change in the production like cost of materials, cost of labor etc. These costs are relevant for making decisions in the future and the reason is that these costs will not incur if additional goods are not manufactured
Fixed costs are those costs which are fixed and do not change with the change in the production like rent and factory building, depreciation of machinery etc. These costs are irrelevant for making decision in future and the reason is that these costs will incur whether the additional goods are produced or not.