Distinction between relevance and cost behavior Gromyko Company makes and sells a toy plane. Gromyko incurred the
Question:
Distinction between relevance and cost behavior Gromyko Company makes and sells a toy plane. Gromyko incurred the following costs in its most recent fiscal year:
Gromyko could purchase the toy planes from a supplier. If it did, the company would continue to sell them using its own logo, advertising program, and sales staff.
Required
Identify each cost as relevant or irrelevant to the outsourcing decision and indicate whether the cost is fixed or variable relative to the number of toy planes manufactured and sold.
Transcribed Image Text:
Cost Items Reported on Income Statement Sales commissions (1% of sales) Sales manager's salary Shipping and handling costs ($0.75 per unit) Cost of renting the administrative building Utility costs for the manufacturing plant ($0.25 per unit produced) Manufacturing plant manager's salary Materials costs ($4 per unit produced) Real estate taxes on the manufacturing plant Depreciation on manufacturing equipment Packaging cost ($1 per unit produced) Wages of the plant security guard Costs of TV commercials Labor costs ($3 per unit)
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Cost Items Relevance Behavior Sales commissions 1 of sales Irrelevant Variable Sales managers salary ...View the full answer
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Fundamental Managerial Accounting Concepts
ISBN: 978-0078110894
6th Edition
Authors: Edmonds, Tsay, olds
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