1. Two partners who owns IT Business Solutions, a company supplying specialist software, operate out of an office in Fourways, Johannesburg but have discovered a vacant office building close to Sandton City. One of the partners favours moving to the new location because she believes the additional business gained by moving will exceed the higher rent plus the cost of making the move. The other partner disagree. She argues: " We have already paid for office stationary, business cards and signage that cannot be moved or sold. We have spent so much on our current office that we can't afford to waste this money by moving now." The partners ask you for your advice. Which partner is correct? How would you explain your reasons to them?
Solution Preview
We have to consider the concept of relevant cost here.
Relevant cost
An item is relevant if it is different between or among decision alternatives. That item is not relevant if it is the same between or among decision alternatives.
Here are some follow-up generalizations. As with all generalizations, there will always be exceptions.
1. In general, sunk costs are not relevant because they ...
... This explains the concept of Relevant Costs for ... An Illustration of Relevant Costs for Decision-Making. ... The concepts of incremental cost, opportunity cost, sunk ...
...Relevant Cost: Following are the two relevant costs which will ... For the purpose of cost allocation analysis we ...concept in allocation of corporate expenses is to ...
... This costing concept would also be beneficial to reduce the price of health care services,. ... All the cost accounting concepts are quite relevant. ...
... One potential acquisition candidate is Computer Concepts Inc. ... 4) purchase of assets below replacement cost, and (5 ... Why is such a question relevant to a company ...
... The concept of "significant influence" must be satisfied ... of calculating inventory and other related concepts. ... in order to be relevant, accounting information ...
... The study of private consumption decisions is, therefore, relevant. ... at least, three channels: (i) increasing the prices of assets, the cost of capital ...
... remains is the more pragmatic question of concept lie in ... another entity does not make the item relevant to investors ... WHICH MEASUREMENTS FLOW FROM THE CONCEPTS? ...
... Specifically, we can classify costs concepts useful in classifying ... This section explains each concept for assigning costs... known as an activity's relevant range ...
... Marketing Arithmetic Key Concepts Marketing Arithmetic Stats are hip Finding ... Make-or-Buy Example Relevant Cost Comparison Make Buy Another manufacturer offers ...
... The concept of opportunity cost and examination of how to calculate ... Citing examples, differentiate between opportunity cost, marginal cost, and relevant cost. ...