If a company produces some \"seconds\" that cannot be sold at the normal price t
ID: 2395958 • Letter: I
Question
If a company produces some "seconds" that cannot be sold at the normal price through regular distribution channels, which of the following is/are relevant for setting a minimum selling price? Select all that apply
Fixed manufacturing overhead
Variable manufacturing overhead
Variable selling expenses
Fixed selling expenses
Direct material
Direct labor
A.Fixed manufacturing overhead
B.Variable manufacturing overhead
C.Variable selling expenses
D.Fixed selling expenses
E.Direct material
F.Direct labor
Explanation / Answer
The cost which is relevant for setting a minimum selling price is the variable selling expense. All production costs whether variable or fixed have already been incurred and are sunk. Thus, they are irrelevant. Correct option is C.
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