Question

9. Ryan is a manager in a bank. He is using cost information to make a number of operational decisions. Some of these costs are salaries for other employees, who have formal one-year employment contracts. Which of the following statements are true regarding these costs? (Check all that apply.) O Ryan can classify salary costs as sunk, regardless of whether there is a contract. Because contracted salary costs have not yet been incurred, they are not actually sunk costs. Ryan can deem contracted salary costs as irrelevant for most operational decisions. Because contracted salary costs are labor-oriented, they will always be relevant to operational decisions. 10. Shelby is considering whether to drop a product line from her business. Some administrative costs are being allocated to the product line but will not change in total if Shelby decides to drop the product line. Which of the following statements are true regarding these costs? (Check all that apply.) The allocated administrative costs are irrelevant to Shelby's decision to drop the product line. O Administrative costs are always relevant. The administrative costs are allocated costs. Administrative costs are always irrelevant.

Answer 1

Ans 9: Option 4 is correct

Labor costs are always operational costs of a firm, whether they are contracts or salaries. Therefore, they will always be relevant for operational decisions.

Ans 10: Option 1 and Option 2 are correct

As for the decision to drop a product line, overall administrative costs remain unchanged for the firm, Therefore, they are not relevant in the decision of dropping of product line. However, for overall operations of the firm, they are always relevant.