Relevant costing for decision making

Aug 13, 2015
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Hello everyone
I'm studying relevant costing and I'm having a problem trying to know which of the two revenues are relevant in the following question " Mary Ltd bought a machine one year ago and at purchase entered into a maintenance contract for #30,000 covering a three years period. The machine is used to make Nigerian hair. It is forecasted that sales of Nigerian hair made by this machine would be disappointing and generate #15000 per annum for the next two years. Due to the planned expansion of the hair business by Mary Ltd, the machine can however be sold for #25000 and replaced with another machine costing #50000 with annual sales of #35000 per annum for the next two years.
Therefore, which of the two future cash inflows is relevant to the decision to expand the business and why?


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