Each week, Oracle Oil Company incurs total costs of $214,000 to process several tons of olives into olive oil. The firm can then spend $15,000 to bottle the oil as is, or it can spend $20,000 to add flavorings to the oil and then bottle it. In the weeks ahead, Oracle expects its cost of purchasing empty bottles to increase by $3,000 and its cost of purchasing flavorings to decrease by $1,000. Oracles CFO asks you what, if any, role these cost changes should play in the firms decision of which product to manufacture. How should you respond?

• A : You should tell the CFO that neither the change in bottling costs nor the change in flavoring costs need to be included in the firms incremental analysis of which product to manufacture.

• B : You should tell the CFO that the change in flavoring costs need not be included in the firms incremental analysis of which product to manufacture, although the change in bottling costs must be factored in.

• C : You should tell the CFO that both the change in bottling costs and the change in flavoring costs must be included in the firms incremental analysis of which product to manufacture.

• D : You should tell the CFO that the change in bottling costs need not be included in the firms incremental analysis of which product to manufacture, although the change in flavoring costs must be factored in.