Two alternatives, code-named X and Y, are under consideration at Guyer Corporati
ID: 2473849 • Letter: T
Question
Two alternatives, code-named X and Y, are under consideration at Guyer Corporation. Costs associated with the alternatives are listed below.
Alternative X
Alternative Y
Materials costs
$41,000
$59,000
Processing costs
$45,000
$45,000
Equipment rental
$17,000
$17,000
Occupancy costs
$16,000
$24,000
Are the materials costs and processing costs relevant in the choice between alternatives X and Y? (Ignore the equipment rental and occupancy costs in this question.)
A) Neither materials costs nor processing costs are relevant
B) Only processing costs are relevant
C) Only materials costs are relevant
D) Both materials costs and processing costs are relevant
Alternative X
Alternative Y
Materials costs
$41,000
$59,000
Processing costs
$45,000
$45,000
Equipment rental
$17,000
$17,000
Occupancy costs
$16,000
$24,000
Explanation / Answer
Ans : Only Material Cost is relevant because processing cost is same amount in both the alternaives so it is irrelevent. Therefor the correct answer is Option C.