E4–1 Time allowed: 15 minutes Listed below are a number of costs that may be relevant in decisions faced by the management of Svahn, AB, a Swedish manufacturer of sailing yachts:

Required Copy the information above onto your answer sheet and place an X in the appropriate column to indicate whether each item is relevant or not relevant in the following situations (requirement 1 relates to Case 1 above, and requirement 2 relates to Case 2):
1 Management is considering purchasing a Model B300 machine to use in addition to the company’s present Model B100 machine. This will increase the company’s production and sales. The increase in volume will be large enough to require increases in fixed selling expenses and in general administrative overhead, but not in the fixed manufacturing overhead.
2 Management is, instead, considering replacing its present Model B100 2 machine with a new Model B300 machine. The Model B100 machine would be sold.
This change will have no effect on production or sales, other than some savings in direct materials costs due to less waste.

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Item (a) Sales revenue (b) Direct materials (c) Direct labour (d) Variable manufacturing overhead (e) Depreciation - Model B100 machine 10 Book value - Model B100 machine (g) Disposal value-Model B100 machine (h) Market value-Model B300 machine (cost) Depreciation - Model B300 machine Fixed manufacturing overhead (general) Variable selling expense @ Fixed selling expense (m) General administrative overhead. Case 1 Case 2 Relevant Not relevant Relevant Not relevant