Tiffani Franks is trying to decide which of two different kinds of candy to sell

Question

Tiffani Franks is trying to decide which of two different kinds of candy to sell in her retail candy store. One type is a name-brand candy that will practically sell itself. The other candy is cheaper to purchase but does not carry an identifiable brand name. Ms Franks believes that she will have to incur significant advertising costs to sell this candy. Several cost items for the two types of candy are as follows: Brandless Candy Name-Brand Candy Cost per box Sales commissions per box Rent of display space Advertising 8.00 1.00 ,500.00 2,000.00 5.00 Cost per box .00 Sales commissions per box ,500.00 Rent of display space 3,000.00 Advertising Required ldentify each cost as being relevant or irrelevant to Ms. Franks's decision and indicate whether it is fixed or variable relative to the number of boxes sold t Items Cost per box Sales commissions per box Rent of display space

Explanation / Answer

cost Name Relevance Behaviour Cost per box Relevant ,as it is different for both candy Variable,varies with number of box sold sales commission IrRelevant,as it remains same for both candy ($1 per box) variable,varies with number of box sold Rent of display space Irrelevant,as it is same for both candy ($1500) Fixed Advertising Relevant ,as it is decreased if brand candy is produced. Fixed ,not varies with level of output.

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