Expert Answers

What role does a trade in allowance on old equipment play in a decision to retain or replace equipment?

SmartCard is considering eliminating one of its product lines. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. What financial effects occur if the product line is discontinued?

It costs Fortune Company $12 of variable and $5 of fixed costs to produce one bathroom scale which normally sells for $35. A foreign wholesaler offers to purchase 1,000 scales at $16 each. Fortune would incur special shipping costs of $2 per scale if the order were accepted. Fortune has sufficient unused capacity to produce the 1,000 scales. If the special order is accepted, what will be the effect on net income?

Whisker Clean Company spent $4,000 to produce Product 89, which can be sold ‘as is’ for $5,000, or processed further incurring additional costs of $1,500 and then be sold for $7,000. Which amounts are relevant to the decision about Product 89?

A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?