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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