sales = 950,000, variable costs = 450,000, and fixed costs = 310,000. if an addition is offered to a company which is estimated by the sales manager to increase sales by a maximum of $750,000, and the company’s accountants have determined that the proposed addition will add $320,000 to fixed costs each year and variable costs are expected to be at the same percentage as they currently are before the proposed addition, why is the current fixed costs of 310,000 a sunk cost while the addition's fixed cost of 320,000 is an out-of-pocket cost?

sales = 950,000, variable costs = 450,000, and fixed costs = 310,000. if an addition is offered to a company which is estimated by the sales manager to increase sales by a maximum of $750,000, and the company’s accountants have determined that the proposed addition will add $320,000 to fixed costs each year and variable costs are expected to be at the same percentage as they currently are before the proposed addition, why is the current fixed costs of 310,000 a sunk cost while the addition's fixed cost of 320,000 is an out-of-pocket cost?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter5: Activity-based Costing And Management

Section: Chapter Questions

Problem 16MCQ: Suppose that a company is spending 60,000 per year for inspecting, 30,000 for purchasing, and 40,000...

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Suppose that a company is spending 60,000 per year for inspecting, 30,000 for purchasing, and 40,000 for reworking products. A good estimate of nonvalue-added costs would be a. 70,000. b. 130,000. c. 40,000. d. 90,000. e. 100,000.
sales = 950,000, variable costs = 450,000, and fixed costs = 310,000. if an addition is offered to a company which is estimated by the sales manager to increase sales by a maximum of $750,000, and the company’s accountants have determined that the proposed addition will add $320,000 to fixed costs each year and variable costs are expected to be at the same percentage as they currently are before the proposed addition, how much does the addition add to operating income?
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