Question

Fancy Furniture produced a batch of 2,000 coffee tables at a cost of $355,000. It was discovered that the entire batch was finished improperly. Fancy can sell the tables as seconds for $305,000 or spend an additional $315,000 to refinish them and sell them for $605,000.

Which of the following is not relevant to management's decision regarding refinishing the tables or selling them as is?
a) The additional $300,000 revenue that can be generated if the tables are refinished.
b) The $355,000 manufacturing cost of the tables already incurred.
c) The additional $315,000 cost to refinish the tables.
d) The effect of selling "seconds" on Fancy's reputation as a fine-furniture manufacturer.

Answer 1

b) The $355,000 manufacturing cost of the tables already incurred.

Explanation:

The Business has already incurred this expense in making the coffee tables, this can not be done. Therefore, it does not make sense to consider this when considering whether to complete the

Tables, or sell them as they now are

All other points contribute either directly or indirectly to the decision that the company is about to take in this regard.

So, the correct answer is b