Author Question: Management is considering two alternatives. Alternative A has projected revenue per year of $100,000 ... (Read 142 times)

RODY.ELKHALIL · **on:** Mar 6, 2021

Management is considering two alternatives. Alternative A has projected revenue per year of $100,000 and costs of $70,000 while Alternative B has revenue of $100,000 and costs of $60,000. Both projects require an initial investment of $250,000 of which $75,000 has already been set aside and will be used as a down payment on the project that is chosen. There are also other qualitative factors that management must consider before making a final choice. Which of the following statements is correct about relevant costs and relevant revenues.
◦ The sunk cost of $75,000 is relevant
◦ The projected revenues are relevant to the decision
◦ The initial investment of $250,000, the projected revenues, and the projected costs are all relevant
◦ The only relevant item are the costs as they differ between alternatives

SamMuagrove · **Reply #1 on:** Mar 6, 2021

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