Easton Company makes and sells scooters.Easton incurred the following costs in its most recent fiscal year: $\begin{array}{c}\text { Cost Items Appearing on the Income Statement }\\begin{array}{|l|l|}
\hline\text { Materials cost ( } \$ 10 \text { per unit) } & \text { Depreciation on manufacturing equipment } \
\hline \text { Company president's salary } & \text { Salaries of administrative personnel } \
\hline \text { Labor cost ( } \$ 4 \text { per unit) } & \text { Research and development costs } \
\hline \text { Advertising costs }(150,000 \text { per year) } & \text { Real estate taxes on factory } \
\hline \text { Shipping and handling (\$0.15 per unit) } & \text { Inspection costs } \
\hline
\end{array}\end{array}$ Easton can currently purchase the scooters it makes from Weston Company.If the company purchases the scooters,Easton would still continue to use its own logo,sales staff,and advertising programs.If Easton outsources the scooters to Weston,which of the following costs would be relevant to the outsourcing decision?
A) Materials cost
B) Shipping and handling
C) Inspection costs
D) All of these answers are correct.

Question

Easton Company makes and sells scooters.Easton incurred the following costs in its most recent fiscal year: $\begin{array}{c}\text { Cost Items Appearing on the Income Statement }\\begin{array}{|l|l|}
\hline\text { Materials cost ( } \$ 10 \text { per unit) } & \text { Depreciation on manufacturing equipment } \
\hline \text { Company president's salary } & \text { Salaries of administrative personnel } \
\hline \text { Labor cost ( } \$ 4 \text { per unit) } & \text { Research and development costs } \
\hline \text { Advertising costs }(150,000 \text { per year) } & \text { Real estate taxes on factory } \
\hline \text { Shipping and handling (\$0.15 per unit) } & \text { Inspection costs } \
\hline
\end{array}\end{array}$   Easton can currently purchase the scooters it makes from Weston Company.If the company purchases the scooters,Easton would still continue to use its own logo,sales staff,and advertising programs.If Easton outsources the scooters to Weston,which of the following costs would be relevant to the outsourcing decision?
A) Materials cost
B) Shipping and handling
C) Inspection costs
D) All of these answers are correct.

Quizplus · Accepted Answer

All of the costs listed would be relevant to the outsourcing decision. Materials cost would still be incurred as Weston would need to purchase the materials to create the scooters. Shipping and handling costs would be incurred for the transportation of the scooters from Weston to Easton's distribution center. Inspection costs would still be relevant as Easton would need to ensure that the scooters meet their quality standards before selling them to customers.

Easton Company Makes and Sells Scooters Easton Can Currently Purchase the Scooters It Makes from Weston