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Unformatted text preview: 15-2115-32 (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 thatprocessing fine writing paper further to produce 10,000 boxes of fancystationery would result in a profit increase of $13,120. This occursbecause 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 writingpaper to satisfy the demand for fancy stationery.(2) No, the decision would not change if the manufacturing costs requiredto produce the fine writing paper were known. The reason is that thesecosts must be incurred in the same amount regardless of whichalternative is chosen and therefore they are not relevant to the...
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This homework help was uploaded on 04/08/2008 for the course ACC 102 taught by Professor Drucker during the Fall '07 term at Coastal Carolina University.
- Fall '07