Brief Exercise 9-1 Identifying Relevant Costs (LO1 - CC1) Indicate whether the cost given in the table may be relevant in decisions faced by the management of Svahn, AB, a Swedish manufacturer of sailing yachts, in the following situations (part (1) relates to case 1; part (2) relates to case 2): Required: 1. Management is considering purchasing a Model B300 machine to use in addition to the company's present Model B100 machine. This would increase the company's production and sales. The increase in volume would be large enough to require increases in fixed selling expenses and in general administrative overhead but not in fixed manufacturing overhead. 2. Management is instead considering replacing its present Model B100 machine with a new Model B300 machine. The Model B100 machine would be sold. This change would have no effect on production or sales, other than some savings in direct materials costs due to reduced waste. Item Case 1 Case 2 a. Sales revenue b. Direct materials c. Direct labour d. Variable manufacturing overhead e. Depreciation Model B100 machine f. Book value-Model B100 machine g. Disposal value-Model B100 machine h. Market value-Model B300 machine (cost) i. Depreciation Model B300 machine j. Fixed manufacturing overhead (general) k. Variable selling expense 1. Fixed selling expense m. General administrative overhead