Relevant or avoidable costs and Irrelevant or unavoidable costs – The major decisions that a business has to take during its operations include dropping of a product, elimination of a segment, buy or make a product, to sell at scrap or rework on the product, to accept special offers etc. All these decisions are taken on the basis of the costs involved. There are two types of costs – 1. Relevant costs or avoidable costs – these costs can be defined as the costs that can be avoided if we choose over option over the other. Example of relevant costs are, direct material, direct labor, avoidable fixed costs etc. 2. Irrelevant costs – these costs can be defined as the costs that cannot be avoided in any of the options available or the costs which have been already incurred like sunk costs. Examples of irrelevant costs are unavoidable fixed costs, or the costs which have been already incurred. Requirement 1 To identity: Each cost in the income statement as either relevant or irrelevant to Summer Fun’s decision.

Question

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Answer 1

Question

Chapter 25, Problem P25.27BPGB

To determine

Concept Introduction:

Relevant or avoidable costs and Irrelevant or unavoidable costs –

The major decisions that a business has to take during its operations include dropping of a product, elimination of a segment, buy or make a product, to sell at scrap or rework on the product, to accept special offers etc. All these decisions are taken on the basis of the costs involved. There are two types of costs –

1. Relevant costs or avoidable costs – these costs can be defined as the costs that can be avoided if we choose over option over the other. Example of relevant costs are, direct material, direct labor, avoidable fixed costs etc.

2. Irrelevant costs – these costs can be defined as the costs that cannot be avoided in any of the options available or the costs which have been already incurred like sunk costs. Examples of irrelevant costs are unavoidable fixed costs, or the costs which have been already incurred.

Requirement 1

To identity:

Each cost in the income statement as either relevant or irrelevant to Summer Fun’s decision.

To determine

Requirement 2

To prepare:

A differential analysis to determine whether Summer Fun should accept this special sales order or not

To determine

Requirement 3

To identity:

Long-term factors to be considered in deciding whether to accept the special sales order or not.

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A balance sheet shows cash, $75,000; marketable securities, $110,000; receivables, $90,000; and $225,000 of inventories. Current liabilities are $200,000. The current ratio is 1.375 to 1. a. True b. False

Answer 2

Question

Chapter 25, Problem P25.27BPGB

To determine

Concept Introduction:

Relevant or avoidable costs and Irrelevant or unavoidable costs –

The major decisions that a business has to take during its operations include dropping of a product, elimination of a segment, buy or make a product, to sell at scrap or rework on the product, to accept special offers etc. All these decisions are taken on the basis of the costs involved. There are two types of costs –

1. Relevant costs or avoidable costs – these costs can be defined as the costs that can be avoided if we choose over option over the other. Example of relevant costs are, direct material, direct labor, avoidable fixed costs etc.

2. Irrelevant costs – these costs can be defined as the costs that cannot be avoided in any of the options available or the costs which have been already incurred like sunk costs. Examples of irrelevant costs are unavoidable fixed costs, or the costs which have been already incurred.

Requirement 1

To identity:

Each cost in the income statement as either relevant or irrelevant to Summer Fun’s decision.

To determine

Requirement 2

To prepare:

A differential analysis to determine whether Summer Fun should accept this special sales order or not

To determine

Requirement 3

To identity:

Long-term factors to be considered in deciding whether to accept the special sales order or not.

Expert Solution & Answer

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Answer 3

Question

Chapter 25, Problem P25.27BPGB

To determine

Concept Introduction:

Relevant or avoidable costs and Irrelevant or unavoidable costs –

The major decisions that a business has to take during its operations include dropping of a product, elimination of a segment, buy or make a product, to sell at scrap or rework on the product, to accept special offers etc. All these decisions are taken on the basis of the costs involved. There are two types of costs –

1. Relevant costs or avoidable costs – these costs can be defined as the costs that can be avoided if we choose over option over the other. Example of relevant costs are, direct material, direct labor, avoidable fixed costs etc.

2. Irrelevant costs – these costs can be defined as the costs that cannot be avoided in any of the options available or the costs which have been already incurred like sunk costs. Examples of irrelevant costs are unavoidable fixed costs, or the costs which have been already incurred.

Requirement 1

To identity:

Each cost in the income statement as either relevant or irrelevant to Summer Fun’s decision.

To determine

Requirement 2

To prepare:

A differential analysis to determine whether Summer Fun should accept this special sales order or not

To determine

Requirement 3

To identity:

Long-term factors to be considered in deciding whether to accept the special sales order or not.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 25, Problem P25.27BPGB

To determine

Concept Introduction:

Relevant or avoidable costs and Irrelevant or unavoidable costs –

The major decisions that a business has to take during its operations include dropping of a product, elimination of a segment, buy or make a product, to sell at scrap or rework on the product, to accept special offers etc. All these decisions are taken on the basis of the costs involved. There are two types of costs –

1. Relevant costs or avoidable costs – these costs can be defined as the costs that can be avoided if we choose over option over the other. Example of relevant costs are, direct material, direct labor, avoidable fixed costs etc.

2. Irrelevant costs – these costs can be defined as the costs that cannot be avoided in any of the options available or the costs which have been already incurred like sunk costs. Examples of irrelevant costs are unavoidable fixed costs, or the costs which have been already incurred.

Requirement 1

To identity:

Each cost in the income statement as either relevant or irrelevant to Summer Fun’s decision.

To determine

Requirement 2

To prepare:

A differential analysis to determine whether Summer Fun should accept this special sales order or not

To determine

Requirement 3

To identity:

Long-term factors to be considered in deciding whether to accept the special sales order or not.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 25, Problem P25.27BPGB

To determine

Concept Introduction:

Relevant or avoidable costs and Irrelevant or unavoidable costs –

The major decisions that a business has to take during its operations include dropping of a product, elimination of a segment, buy or make a product, to sell at scrap or rework on the product, to accept special offers etc. All these decisions are taken on the basis of the costs involved. There are two types of costs –

1. Relevant costs or avoidable costs – these costs can be defined as the costs that can be avoided if we choose over option over the other. Example of relevant costs are, direct material, direct labor, avoidable fixed costs etc.

2. Irrelevant costs – these costs can be defined as the costs that cannot be avoided in any of the options available or the costs which have been already incurred like sunk costs. Examples of irrelevant costs are unavoidable fixed costs, or the costs which have been already incurred.

Requirement 1

To identity:

Each cost in the income statement as either relevant or irrelevant to Summer Fun’s decision.

To determine

Requirement 2

To prepare:

A differential analysis to determine whether Summer Fun should accept this special sales order or not

To determine

Requirement 3

To identity:

Long-term factors to be considered in deciding whether to accept the special sales order or not.

Answer 6

Chapter 25, Problem P25.27BPGB

To determine

Concept Introduction:

Relevant or avoidable costs and Irrelevant or unavoidable costs –

The major decisions that a business has to take during its operations include dropping of a product, elimination of a segment, buy or make a product, to sell at scrap or rework on the product, to accept special offers etc. All these decisions are taken on the basis of the costs involved. There are two types of costs –

1. Relevant costs or avoidable costs – these costs can be defined as the costs that can be avoided if we choose over option over the other. Example of relevant costs are, direct material, direct labor, avoidable fixed costs etc.

2. Irrelevant costs – these costs can be defined as the costs that cannot be avoided in any of the options available or the costs which have been already incurred like sunk costs. Examples of irrelevant costs are unavoidable fixed costs, or the costs which have been already incurred.

Requirement 1

To identity:

Each cost in the income statement as either relevant or irrelevant to Summer Fun’s decision.

Answer 7

Chapter 25, Problem P25.27BPGB

To determine

Concept Introduction:

Relevant or avoidable costs and Irrelevant or unavoidable costs –

The major decisions that a business has to take during its operations include dropping of a product, elimination of a segment, buy or make a product, to sell at scrap or rework on the product, to accept special offers etc. All these decisions are taken on the basis of the costs involved. There are two types of costs –

1. Relevant costs or avoidable costs – these costs can be defined as the costs that can be avoided if we choose over option over the other. Example of relevant costs are, direct material, direct labor, avoidable fixed costs etc.

2. Irrelevant costs – these costs can be defined as the costs that cannot be avoided in any of the options available or the costs which have been already incurred like sunk costs. Examples of irrelevant costs are unavoidable fixed costs, or the costs which have been already incurred.

Requirement 1

To identity:

Each cost in the income statement as either relevant or irrelevant to Summer Fun’s decision.

Answer 8

To determine

Requirement 2

To prepare:

A differential analysis to determine whether Summer Fun should accept this special sales order or not

Answer 9

To determine

Requirement 2

To prepare:

A differential analysis to determine whether Summer Fun should accept this special sales order or not

Answer 10

To determine

Requirement 3

To identity:

Long-term factors to be considered in deciding whether to accept the special sales order or not.

Answer 11

To determine

Requirement 3

To identity:

Long-term factors to be considered in deciding whether to accept the special sales order or not.

Answer 12

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Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 25 - Prob. 1QC Ch. 25 - Prob. 2QC Ch. 25 - Which of the following costs are irrelevant to...Ch. 25 - Prob. 4QC Ch. 25 - Prob. 5QC Ch. 25 - 6. When companies are price-setters, their...Ch. 25 - Prob. 7QC Ch. 25 - Prob. 8QC Ch. 25 - Prob. 9QC Ch. 25 - Prob. 10QC

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Requirement 2

To prepare:

A differential analysis to determine whether Summer Fun should accept this special sales order or not

Requirement 3

To identity:

Long-term factors to be considered in deciding whether to accept the special sales order or not.

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Chapter 25 Solutions

Concept explainers

Videos

Requirement 2 To prepare: A differential analysis to determine whether Summer Fun should accept this special sales order or not

Requirement 3 To identity: Long-term factors to be considered in deciding whether to accept the special sales order or not.

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Chapter 25 Solutions

Requirement 2

To prepare:

A differential analysis to determine whether Summer Fun should accept this special sales order or not

Requirement 3

To identity:

Long-term factors to be considered in deciding whether to accept the special sales order or not.