Fancy Furniture produced a batch of 2,000 coffee tables at a cost of $355,000. I
ID: 2351619 • Letter: F
Question
Fancy Furniture produced a batch of 2,000 coffee tables at a cost of $355,000. It was discovered that the entire batch was finished improperly. Fancy can sell the tables as seconds for $305,000 or spend an additional $315,000 to refinish them and sell them for $605,000.
Which of the following is not relevant to management's decision regarding refinishing the tables or selling them as is?
Question 6 options:
a)
The additional $300,000 revenue that can be generated if the tables are refinished.
b)
The $355,000 manufacturing cost of the tables already incurred.
c)
The additional $315,000 cost to refinish the tables.
d)
The effect of selling "seconds" on Fancy's reputation as a fine-furniture manufacturer.
a)
The additional $300,000 revenue that can be generated if the tables are refinished.
b)
The $355,000 manufacturing cost of the tables already incurred.
c)
The additional $315,000 cost to refinish the tables.
d)
The effect of selling "seconds" on Fancy's reputation as a fine-furniture manufacturer.
Explanation / Answer
c) The additional $315,000 cost to refinish the tables. Compare the $315,000 cost to refinish the tables with the incremental revenue of $300,000 if the tables are refinished.
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