1. A company has already incurred a $1,000 cost in partially producing its four products. Their selling prices when partially and fully processed follow with additional costs necessary to finish these partially processed units:
|
Product |
Unfinished |
Finished |
Further |
|
Alpha |
$300 |
$600 |
$150 |
|
Beta |
450 |
900 |
300 |
|
Gamma |
275 |
425 |
125 |
|
Delta |
150 |
210 |
75 |
Which product(s) should not be processed further, (a) Alpha, (b) Beta, (c) Gamma, or (d) Delta?
2. Under what conditions is a sunk cost relevant to decision making?
3. What is the difference between avoidable and unavoidable expenses?
4. A segment is a candidate for elimination if (a) its revenues are less than its avoidable expenses, (b) it has a net loss, (c) its unavoidable expenses are higher than its revenues.