Question

University Memorabilia Inc is a locally run retail shop. the store usually closes at 5:00pm, but the owners have inquired about the extra costs involved by letting the store stay open until 9:00pm. The store manager has listed the following monthly expenditures and their related costs:

Item:

1. Manager Salary $40,000 per year

2. Store rent $5,000 per month

3. Sales associates wages $9 per hour

4. Store utilities $$ per hour

Which of the above cost items would be relevant to the decision about staying open extra hours?

A. 1, 2, 3 and 4

B. 2, 3, and 4

C. 2 and 3

D. 3 and 4

Answer 1

Manager Salary $40000 per year and store rent of $5000 are already incurred costs and not relevant in decision making process as these are sunk costs. Sales associates wages $9 per hour and Store utilities $5 per hour are relevant costs for decision about staying extra hours. So, Option D is Correct Answer.