Question

Sophia’s Soaps considers marketing a new line of soap each year. You are aware of the following information. Which of the following pieces of information are NOT relevant to determining whether to develop a new line of soap? Sales of the new formula compliment an existing line of lotions. Sales of the soaps are expected to result in an increase of $150,000 in sales of the lotion. Sophia s new formula replaces an old formula. The old formula earned $165,000 in sales. Releasing a new line of soaps requires an additional machinery which at a cost of $31,000. Research to develop the new soap cost $25,000. The expected tax bill is 21% of income.

Answer 1

The expected tax bill is 21% of income. ⇒ NOT RELEVANT, SINCE IT WILL NOT CHANGE WHETHER SOPHIA CARRIES OUT THE PROJECT OR NOT

Step-by-step explanation:

Relevant information about revenues and costs includes all the revenues and costs that can change if we carry out a specific project. Those revenues and costs that do not change (either increase or decrease) are not considered relevant. In this case, tax rates are defined by Congress, not by Sophia or her company.