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15-21 - 15-21 15-32(continued(1(continued The difference...

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15-21 15-32 (continued) (1) (continued) The difference between the relevant revenue and relevant cost is $13,120 ($61,120 - $48,000) higher under the "process further" alternative than it is under the "sell" alternative. This means that processing fine writing paper further to produce 10,000 boxes of fancy stationery would result in a profit increase of $13,120. This occurs because the increase in revenue of $40,000 ($90,000 - $50,000) is $13,120 more than the $26,880 ($28,880 - $2,000) increase in costs. Thus the decision should be to further process enough fine writing paper to satisfy the demand for fancy stationery. (2) No, the decision would not change if the manufacturing costs required to produce the fine writing paper were known. The reason is that these costs must be incurred in the same amount regardless of which alternative is chosen and therefore they are not relevant to the decision.
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