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Pash Company is considering a special order for 1,000 units to be priced at $8.90 (the normal...

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Pash Company is considering a special order for 1,000 units to be priced at $8.90 (the normal price would be $11.50). The order would require specialized materials costing $4.00 per unit. Direct labor and variable factory overhead would cost $2.15 per unit. Fixed factory overhead is $1.20 per unit. However, the company has excess capacity, and acceptance of the order would not raise total fixed factory overhead. The warehouse, however, would have to add capacity costing $1,300. Which of the following is relevant to the special order?

a. $11.50 normal selling price

b. $1.20 fixed factory overhead per unit

c. $7.35 spent on donuts and coffee

d. $8.90 selling price per unit of special order

e. none of these

Relevant Cost

Relevant costs, in short-term decision making, refer to costs that would be avoided if a certain nonroutine decision is not made. In simple terms, relevant costs are avoidable costs.

Answer and Explanation: 1

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Answer: d. $8.90 selling price per unit of special order

  • The selling price of $8.90 is only applied to the special orders. The normal selling price...

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Relevant & Irrelevant Costs for Decision-Making

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Chapter 8 / Lesson 1
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Explore relevant and irrelevant costs. Study the definitions and types of relevant and irrelevant costs, and discover examples of relevant costs in decision-making.


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