The costs listed below relate to a variety of different decision situations.

Cost Decision 1 Unavoidable fi xed overhead Eliminate an unprofi table segment 2 Direct labor Make or buy 3 Original cost of old equipment Equipment replacement 4 Joint production costs Sell or process further 5 Opportunity cost Accepting a special order 6 Segment manager’s salary Eliminate an unprofi table segment

(manager will be terminated)

7 Cost of new equipment Equipment replacement 8 Incremental production costs Sell or process further 9 Direct materials Equipment replacement (the amount of materials required does not change)

10 Rent expense Purchase or lease a building Instructions For each cost listed above, indicate if it is relevant or not to the related decision. For those costs determined to be irrelevant, briefly explain why.

AppendixLO1