**Cost-Benefit Analysis Exercise for Afalava Corporation****Scenario Description:**Two alternatives, code-named X and Y, are under consideration at Afalava Corporation. The costs associated with the alternatives are listed below:| Cost Category | Alternative X | Alternative Y ||-----------------------|:-------------:|:-------------:|| Materials costs | $37,000 | $37,000 || Processing costs | $38,000 | $53,000 || Equipment rental | $12,000 | $26,000 || Occupancy costs | $16,000 | $26,000 |**Question:**Are the materials costs and processing costs relevant in the choice between alternatives X and Y? (Ignore the equipment rental and occupancy costs in this question.)**Choices:**a. Only materials costs are relevant b. Only processing costs are relevant c. Both materials costs and processing costs are relevant d. Neither materials costs nor processing costs are relevant**Graph Explanation:**1. **Cost Table:** - Summarizes the costs for both alternatives X and Y across four categories: materials costs, processing costs, equipment rental, and occupancy costs. - Highlights the differences and similarities in cost between the two alternatives.**Educational Emphasis:**Analyzing cost components to make strategic decisions is critical for effective management. This exercise demonstrates the importance of identifying relevant costs when comparing alternatives and underscores the need to exclude fixed or uniform costs that do not impact the decision. Here, the materials costs are identical for both alternatives, rendering them irrelevant, while the varying processing costs are key in the decision-making process.

Relevant cost is based on the decision-making of the management. It is only affected when management…

Two alternatives, code-named X and Y, are under consideration at Afalava Corporation. Costs associated with the alternatives are listed below. Alternative X Alternative Y $37,000 $37,000 Materials costs....... Processing costs.. $38,000 $53,000 Equipment rental. $12,000 $26,000 Occupancy costs......... $16,000 $26,000 Are the materials costs and processing costs relevant in the choice between alternatives X and Y? (Ignore the equipment rental and occupancy costs in this question.) Select one: a. Only materials costs are relevant b. Only processing costs are relevant C. Both materials costs and processing costs are relevant d. Neither materials costs nor processing costs are relevant

Two alternatives, code-named X and Y, are under consideration at Afalava Corporation. Costs associated with the alternatives are listed below. Alternative X Alternative Y $37,000 $37,000 Materials costs....... Processing costs.. $38,000 $53,000 Equipment rental. $12,000 $26,000 Occupancy costs......... $16,000 $26,000 Are the materials costs and processing costs relevant in the choice between alternatives X and Y? (Ignore the equipment rental and occupancy costs in this question.) Select one: a. Only materials costs are relevant b. Only processing costs are relevant C. Both materials costs and processing costs are relevant d. Neither materials costs nor processing costs are relevant

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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