A Company Has Spent $5,000 on a Report into the Viability

question 35

Multiple Choice

A company has spent $5,000 on a report into the viability of using a subcontractor. The report highlighted the following: A machine purchased six years ago for $30,000 would become surplus to requirements. It has a written-down value of $10,000 but would be resold for $12,000. A machine operator would be made redundant and would receive a redundancy payment of $40,000. The administration of the subcontractor arrangement would cost the company $25,000 each year. Which THREE of the following are relevant for the decision? (Choose three.)

• A) A relevant cost of $5,000 for the viability report.
• B) A relevant cost of $30,000 for the machine.
• C) A relevant cost of $40,000 for the redundancy payment.
• D) A relevant cost of $10,000 for the machine.
• E) A relevant cost of $25,000 each year for administration.
• F) A relevant revenue of $12,000 for the machine.

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Definitions:

Concepts

Abstract ideas or mental symbols that represent general categories of objects, events, or qualities.

Formal Reasoning

The process of thinking logically and systematically about abstract concepts and problems.

Specified Clearly

Described or detailed in a clear and exact manner.

Probability

A measure of the likelihood that an event will occur, often expressed as a number between 0 and 1.