Cost: Research expenditures incurred last year, related to new product Decision: Product introduction to marketplace Relevant or Irrelevant? 2. Cost: $4 million advertising program Decision: Whether to promote product A or B with the $4 million program Relevant or Irrelevant? 3. Cost: Manufactured cost of existing inventory Decision: Whether to discard the goods or sell them to a third-world country Relevant or Irrelevant?
Cost: Research expenditures incurred last year, related to new product Decision: Product introduction to marketplace Relevant or Irrelevant? 2. Cost: $4 million advertising program Decision: Whether to promote product A or B with the $4 million program Relevant or Irrelevant? 3. Cost: Manufactured cost of existing inventory Decision: Whether to discard the goods or sell them to a third-world country Relevant or Irrelevant?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
1. Cost: Research expenditures incurred last year, related to new product
Decision: Product introduction to marketplace
Relevant or Irrelevant?
2. Cost: $4 million advertising program
Decision: Whether to promote product A or B with the $4 million program
Relevant or Irrelevant?
3.
Decision: Whether to discard the goods or sell them to a third-world country
Relevant or Irrelevant?
Transcribed Image Text: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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