Question

Which three categories describe situations in which strategic cost analysis recommends an alternative that might otherwise seem unprofitable?

	a.	Keep-or-Drop, Make-or-Buy, and Sell-or-Process Further
	b.	Product Life Cycles, Value Chain, and Strategy Mismatch
	c.	Cost Leadership, Differentiation, and Focusing
	d.	Relevant Costs, Incremental Costs, and Differential Costs

Answer 1

Answer: Option a. Keep-or-Drop, Make-or-Buy, and Sell-or-Process Further

The keep-or-drop category is used in situations where a particular product-line may seem unprofitable and decision is required whether to keep the product or drop the same.

The make-or-buy category is used to compare the costs of manufacturing an item/product in-house versus outsourcing the same and procuring it from an outside supplier.

The sell-or-process further decision is required to be made in case of products which can be sold as is or processed further at additional cost and then sold at a higher price.

Thus, these three categories describe situations in which the strategic cost analysis recommends that an alternative may seem unprofitable hence, option a. is the correct answer.