Homework 6 - To be relevant information must Both of the answers are characteristics of relevant information Which of the following are not relevant to

Homework 6 - To be relevant information must Both of the...

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To be relevant, information must Both of the answers are characteristics of relevant information. Which of the following are not relevant to decision making? Sunk cost Steel City Company (SCC) paid $120,000 to purchase land that it planned to use as a future building site. A short time later the Company was approached with an opportunity to purchase a better property. The new property cost $125,000. After considering the alternative SCC decided to reject the offer because the Company would be required to sell the original site for $119,000 thereby incurring a $1,000 loss on the disposal of the land ($120,000 - $119,000).Based on this information The $119,00 current market value of original site is relevant to the decision. A cost that is relevant to one decision may be irrelevant to a different decision. This statement is True Which of the following is least likely to be classified as a unit-level cost? The cost of plant security. Which of the following is a facility-level cost? The cost of the salary for the company president. The Lamp Company (TLC) currently makes and sells approximately 5,000 lamps per year. TLC recently received an offer from a new customer to purchase 500 lamps. TLC has the capacity to make the additional lamps but is reluctant to accept the offer because the price offered is significantly below the normal selling price. Based on this information TLC if faced with a(n) Special order decision. Harcourt Manufacturing (HM) has the capacity to produce 10,000 fax machines per year. HM currently produces and sells 7,000 units per year. The fax machines normally sell for $100 each. Modem Products has offered to buy 2,000 fax machines from HM for $60 each. Unit-level costs associated with manufacturing the fax machines are $15 each for direct labor and $40 each for direct materials. Product-level and facility-level costs are $50,000 and $65,000, respectively. How much would profit increase (decrease) if HM accepted this special order? $10,000 Revenue (2,000 x $60) $ 120,000 Unit-Level Costs (2,000 x ($15 + $40)) (110,000) Contribution to Profit $ 10,000
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Harcourt Manufacturing (HM) has the capacity to produce 10,000 fax machines per year. HM currently produces and sells 7,000 units per year. The fax machines normally sell for $100 each. Modem Products has offered to buy 2,000 fax machines from HM for $60 each. Unit-level costs associated with manufacturing the fax machines are $15 each for direct labor and $40 each for direct materials. Product-level and facility-sustaining costs are $50,000 and $65,000, respectively. Should HM accept the special order? Yes, but only if qualitative factors are favorable. Accepting the special offer will increase profitability as shown below: Revenue (2,000 x $60) $ 120,000 Unit-Level Costs (2,000 x ($15 + $40)) (110,000) Contribution to Profit $ 10,000 Harcourt Manufacturing (HM) has the capacity to produce 10,000 fax machines per year. HM currently produces and sells 7,000 units per year. HM currently leases its excess capacity for a rental fee of $12,000. The fax machines normally sell for $100 each. Modem Products has offered to buy 2,000 fax machines from HM for $60 each. Unit-level costs associated with manufacturing the fax machines are $15 each for direct labor and $40 each for direct materials. Product-level and facility-level costs are $50,000 and $65,000,
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