Stephenson Company Is Trying to Decide Which One of Two

question 104

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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Definitions:

Brainstorming

A technique for fostering collective creativity, where the aim is to resolve a particular issue by compiling ideas that spontaneously arise from the contributions of group participants.

Clustering

A method used to organize ideas or information into groups based on common characteristics, often used in brainstorming and problem-solving processes.

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