Check my work 2 Exercise 6-16A Identifying avoidable cost of a segment LO 6-4 Ro
ID: 2553359 • Letter: C
Question
Check my work 2 Exercise 6-16A Identifying avoidable cost of a segment LO 6-4 Rooney Corporation is considering the elimination of one of its segments. The segment incurs the following fxed costs. If the segment is eliminated, the building it uses will be sold. nts Advertising expense Supervisory salarien Allocation of companywide facility-level costs ori gina) eont of bu iding Book value of buiiding Market value of bullding Maintenance costs on equipment Real estate taxes on building $ 91,000 178,000 52,000 ebook PrHn 0,000 5,000 2,000 12,000 Required Determine the amount of avoidable cost associated with the segment.Explanation / Answer
Answer
These are not avoidable costs:
1.The facility-level costs ,Ramos will incur them even if it eliminates the segment.
2.The original cost and current book value of building, represent different measures of the same sunk cost
Note:
(Ramos would avoid the real estate taxes if when it sold the building)
Particulars Amount Advertising expense $91000 Market value of the building (opportunity cost) $85000 Maintenance costs on equipment $82000 Real estate taxes on the building $12000 Supervisory salaries $178000 Total avoidable cost $448000