Exercise 61A Distinction between relevance and cost behavior

Exercise 6-1A Distinction between relevance and cost behavior LO 6-1 Gayla Ojeda 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 Ojeda 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 follow:s Brandless Candy Name-Brand Candy $4.00 Cost per box Cost per box Sales commissions per box Rent of display space Advertising $ 6.00 1.00 900.00 2,000.00 1.00 Sales commissions per box 900.00 Rent of display space 3,000.00 Advertising Requirec Identify each cost as being relevant or irrelevant to Ms. Ojeda\'s decision and indicate whether it is fixed or variable relative to the number of boxes sold Relevance Cost items Cost per box Sales commissions per box Rent of display space Advertising Behavior

Solution

Cost Items Relevance Behaviour Reason Cost per Box Relevant Variable Since these are diff for the two options Sales Commission per Box Irrelevant Variable Since these are same for the two options Rent of Display Space Irrelevant Fixed Since these are same for the two options Advertising Relevant Fixed Since these are diff for the two options