EKP purchased a raw material in bulk for $10,000.It then spent an additional $500 to package the product into smaller quantities which it can sell for $12,000.Recently, a situation has arisen in which EKP can add an additional ingredient to the individual packages and sell them for $14,000.The cost of adding the additional ingredient is $1,700.Which amounts are relevant to the decision?
A)$10,000 + $500, $12,000 and $14,000
B)$10,000 + $500, $1,700 and $14,000
C)$12,000, $1,700 and $14,000
D)$10,000, $500, $12,000, $14,000 and $1,700

Question

Quizplus · Accepted Answer

Only the amounts that are relevant to the decision are needed. The $10,000 and $500 have already been spent and are not affected by the decision to add the additional ingredient. The new selling price of $14,000 and the cost of adding the ingredient of $1,700 are the two amounts that are relevant to the decision. Therefore, choice C is the best answer.

EKP Purchased a Raw Material in Bulk for $10,000