Flutty Corporation manufactures a product that has two parts, A and B. It is currently considering two alternative proposals to produce these parts.

The first proposal is for purchasing Part A. This would free up some of the plant space for the manufacture of more of Part B and assembly of the final product. The product manager believes the additional production of the final product can be sold at the current market price. No other changes in manufacturing would be needed.

The second proposal is for purchasing new equipment for the production of Part B. The new equipment requires fewer workers and uses less power to operate. The old equipment has a net disposal value of zero.

Required:

Tell whether the following items are relevant (R) or irrelevant (I) for each proposal. Treat each proposal independently.

a. Total variable manufacturing overhead, Part A

d. Cost of old equipment for manufacturing Part B

c. Total variable selling and administrative costs

f. Sales revenue of the product