Week 3 Part 2 Quiz Copy

Define relevant costs. Why are historical costs irrelevant?

Define opportunity costs

A company has an inventory of parts for a product line that has been discontinued. The parts have been bought for € 75,000. The parts can be reworked for costs of € 28,000, and then sold for € 33,000, or they can be sold as scrap for € 6,000. The company decides to choose the reworking option. What are the opportunity costs of this decision?

One-time only orders should only be accepted if

ooh Company produces three different sizes of stuffed teddy bears (large, medium and small) for discount stores like K-mart. Projected maximum sales of the three products and corresponding costs for the month of January 2015 are given below.

It takes 20, 15 and 10 machine hours to manufacture 100 units of large, medium and small teddy bears, respectively. The company has a monthly machine hour capacity of 2,050 machine hours and this machine hour capacity cannot be increased for at least a year. A foreign firm has offered to buy an additional 2,000 large teddy bears at € 45 each. Which of the following items is right?

The opportunity costs of this foreign order are