10. Identifying Relevant Costs: that the Sea is a manufacturer of sailing yachts. The company has assembled the information shown below that pertains to two independent decision-making contexts called Case A and Case B: Case A: The company chronically has no idle capacity and the old Model B100 machine is the company's constraint. Management is considering purchasing a Model B300 machine to use in addition to the company's present Model B100 machine. The old Model B100 machine will continue to be used to capacity as before, with the new Model B300 machine being used to expand production. This will increase the company's production and sales. The increase in volume will be large enough to require increases in fixed selling expenses and in general administrative overhead, but not enough in the fixed manufacturing overhead. Case B: The old Model B100 machine is not the company's constraint, but management is considering replacing it with a new Model B300 machine because of the potential savings in direct materials with the new machin- The Model B100 machine would be sold. This change will have no effect on production or sales, other tha some savings in direct materials costs due to less waste. Required: Place an X in the appropriate column in the table below to indicate whether each item is rele or irrelevant to the decision context describe in Case A and Case B. Case B Case A Relevant Irrelevant Relevant Irrelevant Item Sales revenue Direct materials Direct labor Variable manufacturing overhead Depreciation - Model B100 machine Book value-Model B100 machine Market value - Model B300 machine (cost) Fixed manufacturing overhead (general) Variable selling expense Fixed selling expense General administrative overhead nar De In lue nf P100 the description of a sunk cc Machine