| Course | AC505 Advanced Managerial/Cost Accounting |
|---|---|
| Unit | Unit 4 |
| Paper type | Relevant cost analysis |
| Length | About 790 words, 5 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Accounting |
| Updated | October 2026 |
Free sample paper for AC505 Unit 4
Sell the Broken Almonds or Mill Them Into Flour? A Unit 4 Relevant Cost Analysis With Two Planted Traps
[Student Name]
Purdue University Global
AC505: Advanced Managerial/Cost Accounting
Unit 4 Relevant Cost Analysis
[Instructor Name]
[Date]
Harrow Creek Nut Company and every figure are composite; the textbooks cited are real.
Memorandum
To: Manager, Ingredients Division From: Cost Analyst Date: March 9, 2027 Re: Almond pieces: sell as is or mill into flour
Mill the pieces into flour. Counting only the amounts that change with the choice, milling adds $130,000 a year to division profit.
Schedule 1: The Division's Draft
The draft compares two complete product statements. Selling the pieces as they are brings 900,000 pounds at $2.10, or $1,890,000, against $1,485,000 of roasting cost charged at $1.65 a pound, for a profit of $405,000. Milling brings 810,000 pounds of flour, after a 90 percent yield, at $3.20, or $2,592,000. Against that it charges the same $1,485,000 of roasting, $486,000 of variable milling and bagging, $86,000 for a leased mill and its operator, the $58,000 market study commissioned last year, and $90,000 of allocated plant overhead, for a profit of $387,000. On this basis, selling as is earns $18,000 more.
Schedule 2: Relevant Amounts Only
Only future amounts that change with the choice belong in a decision schedule (Datar & Rajan, 2021). Three items in the draft fail that test.
The roasting cost is incurred before the decision point. The pieces exist whether they are sold or milled, so the $1,485,000 is the same in both columns and cancels out. Leaving it in only distorts the comparison.
The market study was paid for last year. It is a sunk cost, and no choice made now can recover or avoid it.
The $90,000 of plant overhead is an allocation of costs, including part of the plant manager's pay and the building's depreciation, that will not change if a mill is installed in an unused bay.
The draft made milling look worse by charging it with $148,000 of costs that will be spent either way, so the decision came out wrong even though every number in the schedule was accurate.
What remains is the difference between the alternatives, the incremental analysis managers are taught to build (Horngren et al., 2014). Revenue rises from $1,890,000 to $2,592,000, an increase of $702,000. Added costs are $486,000 of variable milling and bagging, at $0.60 a pound of flour, and $86,000 for the leased mill and operator, a total of $572,000. Milling adds $130,000.
Why the Draft Looked Convincing
The draft was not careless. It followed the format the division uses for every product line, a full statement that charges each product with its share of upstream and plant costs. That format is useful for judging whether product lines cover their full costs over time. It is the wrong tool for a decision about what to do with a byproduct that already exists, because the upstream costs are the same whatever happens next. The market study is a different trap: it feels like a cost of the flour project because it was commissioned for it, but the money is spent, and no choice now changes that. Managers often find sunk costs hard to set aside precisely because they were spent with a purpose, and the research on decision making calls that pull the sunk cost effect.
Effect on Other Products
The pieces are currently sold to a granola maker that buys about a third of the volume on a standing order. Moving all pieces to flour ends that relationship. If the granola maker also buys whole roasted almonds from the division, the analysis should check whether losing the pieces business would put that larger account at risk; the sales manager reports it would not, since the granola maker buys pieces only on the spot market.
Risks and Conditions
The price of $3.20 is the key assumption. At $3.04 a pound, milling would only break even, so the recommendation depends on the flour price holding within about 5 percent. The market study suggested regional bakeries would pay $3.10 to $3.40; we should sign one supply agreement before leasing the mill. Yield is the second assumption: at 85 percent rather than 90, milling adds only about $13,000, so a yield check in the first month matters almost as much as the price. Finally, the lease should run no longer than two years at first, so the division can stop if prices fall (Hilton & Platt, 2020).
Recommendation
Lease the mill for two years, sign at least one bakery agreement at or above $3.10 before installation, and track yield monthly. Treat the market study and roasting cost as outside this decision in future reports as well.
References
Datar, S. M., & Rajan, M. V. (2021). Horngren's cost accounting: A managerial emphasis (17th ed.). Pearson.
Hilton, R. W., & Platt, D. E. (2020). Managerial accounting: Creating value in a dynamic business environment (12th ed.). McGraw Hill.
Horngren, C. T., Sundem, G. L., Schatzberg, J. O., & Burgstahler, D. (2014). Introduction to management accounting (16th ed.). Pearson.
AC505 Unit 4 instructions, in plain terms
Unit 4 of AC505 asks you to analyze a decision using only relevant costs and revenues. Begin with the recommendation. Show the original analysis if one exists, then explain which items fail the relevance test and why: costs incurred before the decision point, sunk costs, and allocations of costs that will not change. Build an incremental schedule with only the amounts that differ between alternatives, including yield or volume effects on revenue. Identify the key assumptions and compute break-even values, such as the price at which the alternatives tie. Consider effects on other products or customers. Close with conditions that manage the main risks. Write for the manager who will decide, in plain language. Cite recognized managerial and cost accounting texts in APA 7.
Inside the AC505 Unit 4 example
The sample's memo recommends milling. Schedule 1 reproduces the division's draft: selling as is earns $405,000 after roasting cost, milling $387,000 after roasting, variable milling and bagging, the leased mill, the study and overhead. Schedule 2 removes roasting as a joint cost, the study as sunk and overhead as unchanged. The highlighted sentence explains how accurate numbers produced a wrong answer. Incremental revenue of $702,000 less $572,000 of added costs gives $130,000. A section explains why the draft's format looked convincing, another checks the granola customer, and the risks section finds break-even at $3.04 a pound and shows a lower yield cutting the gain to about $13,000.
Reading the AC505 Unit 4 grading rubric
Relevant cost analyses in AC505 earn points for correctly excluding irrelevant items and building a clean incremental schedule. Graders check that joint costs before the split-off, sunk costs and unchanged allocations are excluded with reasons. The rubric rewards incremental revenue that reflects yield, and added costs that include new fixed costs. Sensitivity to key assumptions, such as price and yield, earns significant credit, as does attention to effects on other customers. Recommendations with conditions tied to the main risks show judgment. Analyses that leave joint costs in, or compare full product statements, lose substantial credit. Lead with the decision, and reference the texts in APA 7. Graders also look for a clear note listing each excluded amount with its reason.
Common AC505 Unit 4 mistakes, and how to avoid them
Weak Unit 4 analyses keep the joint roasting cost in both columns and then argue about it, which hides the real decision. The sunk market study is treated as a cost of the flour project. Allocated overhead is counted as if it would rise. Revenue ignores yield loss. New fixed costs, like the mill lease, are forgotten. No break-even price or yield is calculated, so the reader cannot judge how safe the recommendation is. If your section's case is a make-or-buy, special order or keep-or-drop decision, a writer can build the incremental schedule and conditions around your figures. Some drafts also leave out the effect on existing customers of the byproduct, such as a buyer who takes part of the volume today and may react to losing it. A good analysis checks that link before recommending a change.
Get an AC505 Unit 4 example written to your instructions
Send every cost the Unit 4 case mentions, including the ones you suspect do not belong, because deciding which to exclude is the graded part; the rubric helps too. Relevant amounts come back in incremental columns, exclusions explained and the break-even point stated, within 24-48h, with no fee on a first sample. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC505 Unit 4 questions, answered
Why is joint cost irrelevant to processing further?
Because it is incurred before the split-off point and is the same whichever way the product goes afterward. Roasting happens whether the pieces are sold as they are or milled, so its cost cannot differ between the alternatives. Allocating it to either product serves inventory valuation, but carrying it into the decision only adds a figure that cancels or misleads.
Is allocated overhead ever relevant?
Only the part that would actually change. If accepting the flour option adds supervision or utilities, those increases are relevant and belong in the incremental column. Overhead that would simply be reassigned to another department if the option were refused is not, however it is labeled. The analysis should say which portion, if any, is avoidable and show where that figure comes from.
How should the memo present costs it excluded?
In a short note beside the schedule, one line per amount with the reason: sunk, identical under both alternatives, or reassigned rather than saved. That note often earns as much credit as the schedule, because it proves the exclusions were deliberate. Leaving the amounts out silently risks a grader assuming they were missed, which reads as the very error the problem planted.
Where can I find a free AC505 Unit 4 sample paper?
This page holds a full AC505 Unit 4 relevant cost analysis for Harrow Creek Nut Company deciding whether to mill broken almond pieces into flour, with the flawed draft, an incremental schedule, break-evens and APA 7 references.
At what flour price would the two choices tie?
About $3.04 a pound. At that price, flour revenue of $2,462,000 just covers the $1,890,000 of as-is revenue given up plus $572,000 of added milling costs, so the decision depends on the price staying near $3.20.