Answer the following questions using the information below:
Stephans Corporation currently manufactures a subassembly for its main product. The costs per unit are as follows:
Bill Company has contacted Stephans with an offer to sell them 5,000 of the subassemblies for $22.00 each. Stephans will eliminate $25,000 of fixed overhead if it accepts the proposal.
-What are the relevant costs for Stephans?
A)$140,000
B)$125,000
C)$105,000
D)$80,000

Question

Answer the following questions using the information below:
Stephans Corporation currently manufactures a subassembly for its main product. The costs per unit are as follows:
  Bill Company has contacted Stephans with an offer to sell them 5,000 of the subassemblies for $22.00 each. Stephans will eliminate $25,000 of fixed overhead if it accepts the proposal.
-What are the relevant costs for Stephans?
A)$140,000 
B)$125,000 
C)$105,000 
D)$80,000

Quizplus · Accepted Answer

Relevant costs are those that will be directly affected by a decision. In this context, $105,000 is the cost that is relevant to Stephans' decision-making process.

Answer the Following Questions Using the Information Below