Chapter 4 problems Relevant vs Irrelevant costs The manager at company XYZ just received the news that his transmission in his company truck went out. The cost of replacing the transmission with a new one will run $5000. The company just purchased the truck only two years ago for $25,000. If the company decided to replace the transmission, they will have put $20,000 additionally into the truck. The manager could sell the truck for $15,000 "as is" and purchase a new truck for $35,000. What should he do? Which of following are relevant costs when in the example? Special price offering A company is producing on average, 10,000 units of product A per month despite having 30% more capacity. Costs per unit of product A are as follows: Direct Material $8.00 Direct Labor 5.00 2.00 Variable Factory Overhead Variable Selling Expense 0.50 Fixed Factory Overhead 3.00 Fixed Office Expense 2.00 $20.50 The company received a special order of 2,000 units of product A at $17.00 per unit from a new customer. Should the company accept the special order, provided that the customer has agreed to pay the variable selling expenses in addition to the price of the product