Stephenson Company Is Trying to Decide Which One of Two

question 3

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: $$\begin{array} { | l | r | r | } \hline & \text { Contract X } & \text { Contract Z } \\\hline \text { Contract Revenue } & \$ 200,000 & \$ 260,000 \\\hline \text { Materials } & 10,000 & 10,000 \\\hline \text { Labor } & 88,000 & 120,000 \\\hline \text { Depreciation on Equipment } & 8,000 & 10,000 \\\hline \text { Cost Incurred for Consulting Advice } & 1,500 & 1,500 \\\hline \text { Allocated Portion of Overhead } & 5,000 & 3,000 \\\hline\end{array}$$ 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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