Question
Maddox, a division of Stanley Enterprises, currently performs computer services for various departments of the firm. One of the services has created a number of
Maddox, a division of Stanley Enterprises, currently performs computer services for various departments of the firm. One of the services has created a number of operating problems, and management is exploring whether to outsource the service to a consultant. Variable and fixed operating costs total $100,000 and $50,000, respectively. In addition, Stanley allocates $20,000 of corporate administrative overhead to Maddox. If Maddox were to use the outside consultant, fixed operating costs would be reduced by 70%.
- The irrelevant costs in Maddox's outsourcing decision total:
- The relevant costs in Maddox's outsourcing decision total:
- A special order generally should be accepted if:
- excess capacity exists and the revenue exceeds all variable costs associated with the order.
- excess capacity exists and the revenue exceeds allocated fixed costs.
- its revenue exceeds allocated fixed costs, regardless of the variable costs associated with the order.
- the revenue exceeds total costs, regardless of available capacity.
E. the revenue exceeds variable costs, regardless of available capacity.
- Which of the following best defines the concept of a relevant cost? A. A past cost that is the same among alternatives. B. A past cost that differs among alternatives. C. A future cost that is the same among alternatives. D. A future cost that differs among alternatives. E. A cost that is based on past experience.
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