Isabella Canton is considering taking a part-time job at a local clothing store. She loves the store and shops there often, but unfortunately, employee discounts are given only to full-time employees. If Isabella takes this job, she would have to withdraw from her Tuesday night basket-weaving class to work. Accepting the job would also mean that Isabella must give up her volunteer work at the local animal sanctuary, an activity that she enjoys a great deal. The new job would pay approximately $125 per week but would cost Isabella $15 per week in gas. Isabella would be able to keep her Saturday afternoon job at the library that pays $40 per week. A list of factors that Isabella has identified follows. For each one, indicate whether it is relevant or irrelevant to Isabella's decision. 1. The $125 income from the new job. 2. The 540 income from the library, 3. The $50 nonrefundable registration fee Isabella paid for the basket-weaving class. 4. The $15 cost for gas. 5. The $75 per month that Isabella spends for clothing. 6. The time Isabella spends volunteering at the animal sanctuary. Potomac Backpacks, Inc. manufactures regular backpacks. The company is considering processing these backpacks further to produce hiking backpacks. A summary of the expected costs and revenues for both of these options follows: Ordinary Backpacks $ 50 Hiking Backpacks $ 75 Activity Estimated sales price Estimated manufacturing cost per unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost $ 15 18 5 5 $ 35 28 $ 15 13 5 $ 50 $8,888 If the company can sell 8,000 units of either product, what is the expected incremental profit or loss from processing the backpacks further? $72.000 O $65.000 ($15,000) $20,000 Knowledge Check 03 Which of the following should be ignored when deciding whether to sell a product as is or process it further? The cost incurred in producing the product so far The cost of processing products further The revenue from processing products further The opportunity cost of resources needed to process products further Knowledge Check 04 Which of the following is the decision rule of a sell-or-process-further decision? A product should be processed further if the incremental revenue from processing it further exceeds the incremental cost A product should be processed further if the total revenue from processing it further exceeds the total manufacturing cost A product should be processed further if there is an increase in revenue from processing it further A product should be processed further if the total cost of processing it further exceeds the incremental revenue