Zoota Ltd makes four products: Alta, Bepha, Delma and Gamta. The selling price and per unit costs are show below.
*Alta and Delma share the same factory; therefore, monthly rent is allocated equally between the two products. Other allocated monthly fixed costs include administrative costs, which are allocated based on a $2/unit charge.
Zoota Ltd is planning to downsize by focusing on the two most profitable products, Bepha and Gamta, while discontinuing Alta and Delma. Which of the following are the correct assessments of the relevance of the items listed?

Question

Zoota Ltd makes four products: Alta, Bepha, Delma and Gamta. The selling price and per unit costs are show below. 
*Alta and Delma share the same factory; therefore, monthly rent is allocated equally between the two products. Other allocated monthly fixed costs include administrative costs, which are allocated based on a $2/unit charge.
Zoota Ltd is planning to downsize by focusing on the two most profitable products, Bepha and Gamta, while discontinuing Alta and Delma. Which of the following are the correct assessments of the relevance of the items listed?

Quizplus · Accepted Answer

Since Zoota Ltd is planning to discontinue Alta and Delma, their selling price is irrelevant. However, raw materials to continue making Bepha and Gamta are relevant, as well as any allocated fixed costs that will be incurred to produce the remaining two products. Allocated rent for both products is also relevant as they will still be using the same factory.

Zoota Ltd Makes Four Products: Alta, Bepha, Delma and Gamta