Case Study: the Craddock Cup

Topics: Income statement, Renting, Income Pages: 4 (722 words) Published: February 13, 2013
Craddock Cup case study
Question Number 1
In determining whether to keep or drop the Craddock Cup, the overhead expense allocations of City field rental, CYSL salaries and CYSL rent should be revised. In determining whether to keep or drop the Craddock Cup, the allocation of City filed rental fee of $1200 from CYSL to the Craddock Cup should be eliminated. CYSL rented 10 soccer fields from the city for 40 weeks a year for a total fee of $48000. However, even if the Craddock Cup was dropped, the rental fee of $48000 can not be avoided. So, the cost of City field rental fee is the irrelevant cost, The allocation of the cost of CYSL salaries should also be revised. The 15% of Rivaldo's salary($6300) should not be allocated as the expense of the Craddock Cup. The cost of Rivaldo's salary is not the relevant cost. If the CYSL dorp the Craddock Cup, the salary of Rivaldo still cannot be avoided. However, the Jansten's salary is the relevant cost. Jansten worked soley on the Craddock Cup. If the CYSL drop the Craddock Cup, the salary of Jansten can be avoided. So the allocation of CYSL salaries is $12000. The allocation cost of CYSL rent and utilities should be eliminated. The cost of rent and utilities is the .irrelevant cost. Even if the Craddock Cup is discontinued, the CYSL rent and utilities still cannot be avoided. So, in determining whether to keep or drop the Craddock Cup, the manager should not consider the overhead expense allocations of City field rental, CYSL salaries and CYSL rent.

| | |Relevant Profit and Cost Data for The Caeddock Cup | |Registration fees $ 9440 | |T-shirts 4800 | |Concessions 17280...
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