Stephenson Company Is Trying to Decide Which One of Two

question 97

Multiple Choice

Stephenson Company is trying to decide which one of two contracts it will accept. The costs and revenues associated with each are listed below: $\begin{array}{lcc}&\text {contract x }&\text {contract z }\\\text { Contract Revenue } & \$ 200,000 & \$ 260,000 \\\text { Materials } & 10,000 & 10,000 \\\text { Labor } &88,000 & 120,000 \\\text { Depreciation on Equipment } & 88,000 & 10,000\\\text { Cost Incurred for Consulting Advice}&\underline{1,500}&\underline{1,500}\\\text { Allocated Portion of Overhead}&\underline{5,000}&\underline{5,000}\end{array}$ The equipment was purchased last year and has no resale value. Which of these amounts is relevant for the selection of one contract over another?

• A) Contract revenue and labor costs
• B) Materials, consulting advice, and allocated overhead
• C) Cost of consulting advice and allocated overhead
• D) Contract revenue, labor costs, and depreciation on equipment

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Definitions:

Adequately Assess

Sufficiently evaluating or measuring performance, skill, knowledge, or condition to meet a defined standard or objective.

Depth

Ensuring one is assessing the extent and seriousness of a concern.

Assessment

A broad array of evaluative procedures that yield information about a person. An assessment may consist of many procedures, including a clinical interview, personality tests, ability tests, and informal assessment.

Mental Status

The level of cognitive, emotional, and psychological functioning or stability of an individual at a given time.