Question

Sheridan Company spent $5600 to produce Product 89, which can be sold as is for $7000, or processed further incurring additional costs of $2100 and then be sold for $9800. Which amounts are relevant to the decision about Product 89?

Answer 1

Answer:

$2,100

Explanation:

The relevant costs are $2,100.

If the additional costs of $2,100 are incurred then the product 89 could be sold for $9,800.

These incremental costs affect the decision whether to sale the product in $7,000 or incur further costs of $2,100 and as result incremental revenue of $2,100(9,800-7,700) is earned i.e revised selling price less revised cost to produce the product.

Before this further costs incremental revenue was $1,400 (7,000-5,600)