Cost: Allocated corporate overhead Decision: Closing a money-losing department Relevant or Irrelevant? 2. Cost: Cost of an old car Decision: Vehicle replacement Relevant or Irrelevant? 3. Cost: Direct materials Decision: Make or buy a product Relevant or Irrelevant? The following costs relate to a variety of decision settings:Consider each of the nine costs listed and determine whether it is relevant or irrelevant to thedecision cited.Cost1. Allocated corporate overhead2. Cost of an old car3. Direct materials4. Salary of marketing managerDecisionClosing a money-losing departmentVehicle replacementMake or buy a productProject discontinuance: manager to be transelsewhere in the firmPurchase of a new homePlant closureProduct introduction to marketplace5. Home theater installation6. Unavoidable fixed overhead7. Research expenditures incurred lastyear, related to new product8. $4 million advertising programWhether to promote product A or B with themillion program9. Manufactured cost of existing inventory Whether to discard the goods or sell them tothird-world country

Direct material represents the material involved in the production process of the company.

Answered: Cost: Allocated corporate overhead…

Business

Accounting

Cost: Allocated corporate overhead Decision: Closing a money-losing department Relevant or Irrelevant?

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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Question

Cost: Allocated corporate overhead

Decision: Closing a money-losing department

Relevant or Irrelevant?

2. Cost: Cost of an old car

Decision: Vehicle replacement

Relevant or Irrelevant?

3. Cost: Direct materials

Decision: Make or buy a product

Relevant or Irrelevant?

The following costs relate to a variety of decision settings:
Consider each of the nine costs listed and determine whether it is relevant or irrelevant to the
decision cited.
Cost
1. Allocated corporate overhead
2. Cost of an old car
3. Direct materials
4. Salary of marketing manager
Decision
Closing a money-losing department
Vehicle replacement
Make or buy a product
Project discontinuance: manager to be trans
elsewhere in the firm
Purchase of a new home
Plant closure
Product introduction to marketplace
5. Home theater installation
6. Unavoidable fixed overhead
7. Research expenditures incurred last
year, related to new product
8. $4 million advertising program
Whether to promote product A or B with the
million program
9. Manufactured cost of existing inventory Whether to discard the goods or sell them to
third-world country

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