Incremental Costs as Relevant Costs

An incremental cost is specifically incurred with the following a course of action and ignorable if such action is not implemented. It contrasts along with sunk costs that have already been incurred and cannot be ignored whether the future course of action is taken. Incremental costs are relevant in decision-making situations as like

a) Whether to buy in a component or service or manufacture it utilize the company's own resources.

b) Whether to further process one of the joint products that emerge from a process before it is sell or sold it in its existing form with no further processing.