A copier company has been using the same Copier A for 5 years. This copier can copy approximately 50 sheets a minute. The company has an opportunity to purchase a new Copier B that can process approximately 60 sheets a minute. The old machine will continue to be used for jobs that aren’t rush jobs. The new machine will create a need for additional fixed selling expenses, an additional supervisor, and the two employees to use the machine. No other fixed costs will change.
Please list out whether each of these costs are relevant ( R) or not relevant ( NR). Format your answer as follows: a) R, b) R, and so forth.
a. Copier revenue
b. Book value-Copier A
c. Disposal value-Copier A
d. Variable selling expenses
e. Fixed selling expenses
f. Depreciation of Copier A
g. General and administrative overhead fixed
h. Direct labor
i. Indirect labor
j. Market value of Copier B
Home Improvement Company, a retail home store, has two major divisions-outdoors and indoors. Here is the data on their income and expenses:
Total Indoor Outdoor
Sales $85,000 $50,000 $35,000
Variable expenses 35,000 15,000 20,000
Contribution margin 50,000 35,000 15,000
Advertising 5,000 2,000 3,000
Supervisor salaries 19,000 10,000 9,000
Store insurance 2,000 1,000 1,000
General administrative 11,000 8,000 3,000
Total fixed expenses 37,000 21,000 16,000
Net operating income (loss) $13,000 $14,000 (1,000)
Due to the loss, the general manager is considering closing the outdoor division and just focusing on the indoor division. If the division were closed, the supervisor salary and the advertising costs could be eliminated. Should the division be closed? Please show your computations to support your answer.