Which of the following are relevant or irrelevant costs for a project?Inventory which would otherwise be scrapped
A. Relevant cost
B. Irrelevant cost
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Employees taken on especially for the project
A. Relevant cost
B. Irrelevant cost
ABC Co has some spare capacity and decides to make a batch of product Y. Product Y requires a raw material which ABC Co has in inventory, but will not be replaced. What is the relevant cost of the raw material if it has no resale value?
A. Past purchase cost
B. Current purchase cost
C. Percentage of Product Y sale price
D. Nil
Y Co enters into a long-term contract under which they will be paid $75,000 at the end of the contract in four years’ time. If interest rates are 5%, what is the present value of the contract (to the nearest hundred dollars)?
A. $75,000
B. $71,400
C. $58,800
D. $61,700
Using IRR and NPV, which project would you choose?
A. Project A
B. Project B
C. Project C
D. Project D