Solution to topic 5 tutorial

# Solution to topic 5 tutorial - SOLUTION TO TOPIC 5 TUTORIAL...

This preview shows pages 1–3. Sign up to view the full content.

SOLUTION TO TOPIC 5 TUTORIAL TOPIC: Special Decision Making Issues 7. Two important criteria that must be satisfied in order for information to be relevant are as follows: (1) Relevant cost or benefit information must involve a future event. In other words, the information must have a bearing on the future. (2) Relevant information must involve costs or benefits that differ among the alternatives. Costs or benefits that are the same across all of the available alternatives have no bearing on the decision. 14-24 Unitized fixed costs can cause errors in decision making because the fixed cost per unit changes as the activity measure changes. For this reason, it is better to include fixed costs in the analysis in their total amounts. 14-31 The owner’s analysis incorrectly includes the following allocated costs that will be incurred regardless of whether the ice cream counter is operated: Utilities . ............................................................................ \$ 4,350 Depreciation of building . ................................................... 6,000 Deli manager’s salary . ....................................................... 4,500 Total . ................................................................................ \$14,850 It is possible that closing the ice cream counter might save a portion of the utility cost, but that is doubtful. A better analysis follows: Sales . ................................................................. \$67,50 0 Less: Cost of food . .............................................. 30,00 0 Gross profit . ....................................................... 37,500 Less: Operating expenses

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Wages of counter personnel . ..................... \$18,0
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 08/26/2011 for the course ACCOUNTING 211 taught by Professor Min during the Three '11 term at Curtin.

### Page1 / 6

Solution to topic 5 tutorial - SOLUTION TO TOPIC 5 TUTORIAL...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online