Professional Documents
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Relevant Information
Chapter
11
Differentiate relevant
from irrelevant
costs and revenues in
decision situations.
Quantitative factors
Financial Nonfinancial
Qualitative factors
Variable Fixed
Costs Costs
Per Unit Per Unit
Direct materials $6.50 $ -0-
Direct labor .50 1.50
Manufacturing costs 1.50 3.50
Total $8.50 $5.00
Outsourcing is Insourcing is
purchasing goods producing goods
and services from or providing services
outside vendors. within the organization.
Stevens Cohen
Revenues $200,000 $100,000
Variable costs 70,000 60,000
Fixed costs 100,000 50,000
Total operating costs $170,000 $110,000
Operating income $ 30,000 $(10,000)
Machine-hours required 2,000 1,000
Total
Revenues $300,000
Variable costs 130,000
Fixed costs 150,000
Total operating costs $280,000
Operating income $ 20,000
Machine-hours required 3,000
Stevens Alone
Revenues $200,000
Variable costs 70,000
Fixed costs 135,000
Total operating costs $205,000
Operating income $ (5,000)
Machine-hours required 3,000