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Relevant Cost Terms: Matching Studio produces and sells 4,000 specialty handbags per month and has the capacity to produce 5,000 units per month. Studio is evaluating a one-time, special order for 2,000 units from a Bloomingdales. Accepting the order will increase variable manufacturing costs and certain fixed selling and administrative costs. It will also require the company to forego the sale of 1,000 units to regular customers. Required Presented below are a number of phrases related to the proposal followed by a list of cost terms. For each phrase, select the most appropriate cost term. Each term is used only once.

(1.) Increased revenues from special order	AnswerIrrelevant fixed outlay costIrrelevant revenuesIrrelevant variable outlay costOpportunity costRelevant fixed outlay costRelevant revenuesRelevant variable outlay costSunk cost
(2.) Lost contribution margin from foregone sales to regular customers	AnswerIrrelevant fixed outlay costIrrelevant revenuesIrrelevant variable outlay costOpportunity costRelevant fixed outlay costRelevant revenuesRelevant variable outlay costSunk cost
(3.) Revenues from 4,000 units sold to regular customers	AnswerIrrelevant fixed outlay costIrrelevant revenuesIrrelevant variable outlay costOpportunity costRelevant fixed outlay costRelevant revenuesRelevant variable outlay costSunk cost
(4.) Variable cost of 4,000 units sold to regular customers	AnswerIrrelevant fixed outlay costIrrelevant revenuesIrrelevant variable outlay costOpportunity costRelevant fixed outlay costRelevant revenuesRelevant variable outlay costSunk cost
(5.) Increase in fixed selling and administrative expenses	AnswerIrrelevant fixed outlay costIrrelevant revenuesIrrelevant variable outlay costOpportunity costRelevant fixed outlay costRelevant revenuesRelevant variable outlay costSunk cost
(6.) Cost of existing equipment used to produce special order	AnswerIrrelevant fixed outlay costIrrelevant revenuesIrrelevant variable outlay costOpportunity costRelevant fixed outlay costRelevant revenuesRelevant variable outlay costSunk cost
(7.) Salary paid to current supervisor who oversees manufacture of special order	AnswerIrrelevant fixed outlay costIrrelevant revenuesIrrelevant variable outlay costOpportunity costRelevant fixed outlay costRelevant revenuesRelevant variable outlay costSunk cost
(8.) Increased variable costs of special order

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