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Arrow is a chain of used car dealers with showrooms in Lincoln, Derby and Sheffield and a separate Head Office. The management accountant is reviewing the profitability of each showroom. The rent and staff costs incurred by each showroom can be saved in the event of closure. Marketing costs are allocated to each showroom, but would not be saved, if any shop were to close. Head office cost is charged at a rate of 7% of sales. The data regarding costs and sales revenues for each showroom are presented below. What type of costs is the rent of showroom? 1. Non relevant 2. Relevant 3. Committed 4. Sunk

Arrow is a chain of used car dealers with showrooms in Lincoln, Derby and Sheffield and a separate Head Office. The management accountant is reviewing the profitability of each showroom. The rent and staff costs incurred by each showroom can be saved in the event of closure. Marketing costs are allocated to each showroom, but would not be saved, if any shop were to close. Head office cost is charged at a rate of 7% of sales. The data regarding costs and sales revenues for each showroom are presented below. What type of costs is the rent of showroom? 1. Non relevant 2. Relevant 3. Committed 4. Sunk

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Arrow is a chain of used car dealers with showrooms in Lincoln, Derby and Sheffield and a separate Head Office. The management accountant is reviewing the profitability of each showroom. The rent and staff costs incurred by each showroom can be saved in the event of closure. Marketing costs are allocated to each showroom, but would not be saved, if any shop were to close. Head office cost is charged at a rate of 7% of sales. The data regarding costs and sales revenues for each showroom are presented below.

What type of costs is the rent of showroom?

1. Non relevant

2. Relevant

3. Committed

4. Sunk

Lincoln 1,500 Derby 1,375 Sheffield 1,230 1,184 Sales Cost of sales Rent of showroom Showroom staff salaries Marketing costs 1,250 50 1,240 67 78 21 28 12 45 22 18
Transcribed Image Text:Lincoln 1,500 Derby 1,375 Sheffield 1,230 1,184 Sales Cost of sales Rent of showroom Showroom staff salaries Marketing costs 1,250 50 1,240 67 78 21 28 12 45 22 18
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