Question

Lake City Plastics currently produces plastic plates and silverware. The company is considering expanding its product offerings to include plastic serving trays. All of the following are relevant costs to this project with the exception of: the cost of additional utilities required to operate the serving tray production operation. any change in the expected sales of plates and silverware gained from offering trays also. a percentage of the current operating overhead. the additional plastic raw materials that would be required. the cost to acquire the forms needed to mold the trays.

Answer 1

Answer: a percentage of the current operating overhead

Explanation: Operating overhead or operating expenses refers to the expenses incurred by an organisation for the smooth running of its business. These overheads do not increase when the company increases its operations by expanding its expenses.

On the other hand additional utilities, offering trays and additional raw material are direct costs and needs to be considered while making a decision.

Hence from the above we can conclude that current operating overhead is a non relevant cost.