Question

Costs associated with two alternatives, code-named Q and R, being considered by Albiston Corporation are listed below: Alternative Q Alternative R Supplies costs$79,000 $79,000 Power costs$36,600 $35,600 Inspection costs$32,000 $35,600 Assembly costs$48,000 $48,000 Required: a. Which costs are relevant and which are not relevant in the choice between these two alternatives

Answer 1

Answer:

Albiston Corporation

Relevant  and Irrelevant Costs:

Relevant Costs:

                      Alternative Q   Alternative R

Power costs        $36,600           $35,600

Inspection costs $32,000           $35,600

Irrelevant Costs:

                      Alternative Q   Alternative R

Supplies costs     $79,000           $79,000

Assembly costs  $48,000           $48,000

Explanation:

a) Data and Comparisons:

                      Alternative Q   Alternative R

Supplies costs     $79,000           $79,000

Power costs        $36,600           $35,600

Inspection costs $32,000           $35,600

Assembly costs  $48,000           $48,000

b) Relevant costs make a difference in the choice between alternative Q or R.  The costs that are the same in amount are not relevant.  Supplies costs and Assembly costs are two irrelevant costs, while Power costs and Inspection costs are relevant because they are not the same under the two alternatives.  They make a difference in the choice of each alternative.