2. Identifying Relevant and Irrelevant Costs The local summer baseball league wa

Question

2. Identifying Relevant and Irrelevant Costs The local summer baseball league wants to buy new uniforms for its teams. The current uniforms are quite old and will require S400 in repairs before they can be handed out to players next week for the upcoming scason. The old uniforms will be replaced as soon as new ones can be purchased. League leaders have investigated several possible fund-raisers and have narrowed the choice down to two options: candy sales or car washes. Each option can gencrate the S2,500 that the new uniforms would cost. Option 1: The candy sales option would require the league to purchase 2,000 candy bars at a cost of S0.75 cach. The players and coaches would then sell the bars for $2.00 cach. The league estimates that it would take about four wecks to sell the candy and collect all of the money. Option 2: The car wash option would require about $200 for buckets, sponges, soap, and towels. A local business has offered to donate the water (estimated at S300 total) and a location. The car washes would be held on Saturdays, and cach team would be required to provide workers. Each car wash day is expected to generate S450 in proceeds, so the league expects that it would take six wecks to raise S2,500. Required: A. Indicate whether cach factor is relevant or Several factors related to the league's choice follow. irrelevant to deciding which project to engage in and briefly explain your reason a. Repair costs for the old uniforms, S400 b. Initial outlay to purchase the candy bars, $1,500 c. Initial outlay to purchase car wash supplies, S200 d. Cost of water for the car wash option, S300 c. Cost of the new uniforms, $2,500 f Additional two weeks that the car wash option would require to raise the money

Explanation / Answer

a. Repair costs for the old uniforms, $400: Irrespective of the options chosen, old uniforms are required to be repaired till the time new uniforms are available. New uniforms shall be available in 4 to 6 weeks time depending upon the option chosen. Therefore, it i an irrelevant cost as it doens't affect the decision.

b. Initial outlay to purchase the candy bars, $1,500: This initial outlay will impact the decision as the league would required to arrange for this money. Therefore, it is a relevant cost.

c. Initial outlay to purchase car wash supplies, $200: This initial outlay will impact the decision as the league would required to arrange for this money. Therefore, it is a relevant cost.

d. Cost of water for teh car wash option, $300: Water would be donated by a local business. Therefore, there is no cost involved and it is an irrelevant cost.

e. Cost of the new uniform, $2,500: Whatever option chosen, the cost of uniforms will remain the same, therefore, it is an irrelevant cost.

f. Additional two weeks that the car wash option would require to raise the money: The two weeks delay in raising the funds will not impact the repair cost of $400 which is anyway to be spent. Further, there is no extra cost involved due to this delay. Therefore, it is an irrelevant cost.

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