Ch 7 Homework Questions 12.50 points Isabella Canton is considering taking a par
ID: 2588960 • Letter: C
Question
Ch 7 Homework Questions
12.50 points Isabella Canton is considering taking a part-time job at a local clothing store. She loves the store and shops there often, but unfortunately employee discounts are given only to full-time employees. If Isabella takes this job, she would have to withdraw from her Tuesday night basket-weaving class to work. Accepting the job would also mean that Isabella must give up her volunteer work at the local animal sanctuary, an activity that she enjoys a great deal. The new job would pay approximately $125 per week but would cost Isabella $15 per week in gas. Isabella would be able to keep her Saturday afternoon job at the library that pays $40 per week. A list of factors that Isabella has identified follows. For each one, indicate whether it is relevant or irrelevant to Isabella's decision 1. The $125 income from the new job. 2. The $40 income from the library. The $50 nonrefundable registration fee Isabela paid for the basket-weaving class. 4. The $15 cost for gas. 5. The $75 per month that Isabella spends for clothing 6. The time Isabella spends volunteering at the animal sanctuary.Explanation / Answer
1)
2)Only variable cost is relevant while making decision as fixed cost will continue to be incurred.
Profit : units [price -variable cost]
= 9400[30-24]
= 56400
A)special offer should be accepted
b)profit will increase by 56400
3)Eliminating of division will result in no contribution and direct fixed cost .However common fixed cost will continue to be incurred resulting in incremental cost of 74000 .
At present loss from Drafty model is (60000)
so Dropping of drafty model will make total profit to decrease by (14000) [74000-60000]
4)
since contribution per hour for square pot is higher and it can be sold in any number of units ,it should be manufactured.
correct option is square ceramic pot
1) Relevant as it will be an incremental Income 2) Irrelevant as the acceptance of new job will have no impact on income from library job 3) Irrelevant ,as it is a sunk cost which is laready incurred and not refundable 4) Relevant ,as it is an incremental cost 5) irrelevant as discount is given only to full time employee so her expense remains the same 6) Irrelevant as same cannot be determined in monetary terms