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Classifying Relevant and Irrelevant Items The law firm of Greenberg Traurig LLP has been asked to represent a local client. All legal proceedings will be
Classifying Relevant and Irrelevant Items The law firm of Greenberg Traurig LLP has been asked to represent a local client. All legal proceedings will be held out of town in Boston. The law firm's accountant has asked you to help determine the incremental cost of accepting this client. Classify each of the following items on the basis of their relationship to this engagement.
Item | Classification |
---|---|
1. The case will require three attorneys to stay four nights in a Boston hotel. | Answer: Relevant cost -opportunity, Relevant cost-outlayIrrelevant cost-outlay, Irrelevant cost-sunk
|
The predicted hotel bill is $3,600. | |
2. Greenberg Traurig LLP's professional staff is paid $2,000 per day for out-of-town assignments. | Answer: Relevant cost -opportunity, Relevant cost-outlay, Irrelevant cost-outlayIrrelevant cost-sunk
|
3. Last year, depreciation on Greenberg Traurig LLP's Philadelphia's office was $25,000. | Answer: Relevant cost -opportunity, Relevant cost-outlay, Irrelevant cost-outlay, Irrelevant cost-sunk
|
4. Round-trip transportation to Boston is expected to cost $250 per person. | Answer: Relevant cost -opportunity, Relevant cost-outlayIrrelevant cost-outlay, Irrelevant cost-sunk
|
5. The firm has recently accepted an engagement that will require partners to spend | Answer: Relevant cost -opportunity, Relevant cost-outlay, Irrelevant cost-outlay, Irrelevant cost-sunk
|
two weeks in Chicago. The predicted out-of-pocket costs of this trip are $25,000. | |
6. The firm has a maintance contract on its computer equipment that will cost $2,200 next year. | Answer: Relevant cost -opportunity, Relevant cost-outlay, Irrelevant cost-outlay, Irrelevant cost-sunk
|
7. If the firm accepts the client and sends attorneys to Boston, it will have to decline a | Answer: Relevant cost -opportunity, Relevant cost-outlay, Irrelevant cost-outlay, Irrelevant cost-sunk
|
conflicting engagement in Miami that would have provided a net cash inflow of $15,000. | |
8. The firm's variable overhead is $125 per client hour. | Answer: Relevant cost -opportunity, Relevant cost-outlay, Irrelevant cost-outlay, Irrelevant cost-sunk
|
9. The firm pays $900 per year for a subscription to a law journal. | AnswerRelevant cost -opportunityRelevant cost-outlayIrrelevant cost-outlayIrrelevant cost-sunk
|
10. Last year the firm paid $22,500 to increase the insulation in its building. | Answer: Relevant cost -opportunity, Relevant cost-outlay, Irrelevant cost-outlay, Irrelevant cost-sunk
|
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