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?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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. Cost: Manufactured cost of existing inventory

Decision: Whether to discard the goods or sell them to a third-world country

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
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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