Chapter 7, Problem 7.18E

Identify relevant costs for different decisions.

(LO 1,2,3,4,5,6), C

The costs listed below relate to a variety of different decision situations.

Cost	Decision
1. Unavoidable fixed overhead	Eliminate an unprofitable segment
2. Direct labor	Make or buy
3. Original cost of old equipment	Equipment replacement
4. Joint production costs	Sell or process further
S. Opportunity cost	Accepting a special order
6. Segment manager’s salary	Eliminate an unprofitable segment (manager will be terminated)
7. Cost of new equipment	Equipment replacement
8. Incremental production costs	Sell or process further
9. Direct materials	Equipment replacement (the amount of materials required does not change)
10. Rent expense	Purchase or lease a building

Instructions

For each cost listed above, indicate if it is relevant or not to the related decision. For those costs determined to be irrelevant, briefly explain why.