| Course | BUS 510 Managerial Accounting |
|---|---|
| Module | Module 8 |
| Paper type | Relevant cost decision analysis |
| Length | About 1,138 words, 7 pages |
| Format | APA 7 student paper |
| School | Aspen University |
| Program | MBA |
| Updated | October 2026 |
Free sample paper for BUS 510 Module 8
The Canning Line Is Paid For, and That Does Not Matter: Relevant Costs in Two Decisions at a Craft Brewery
Student Name
MBA Program, Aspen University
BUS 510: Managerial Accounting
Instructor Name
Month Day, Year
The Canning Line Is Paid For, and That Does Not Matter: Relevant Costs in Two Decisions at a Craft Brewery
Big Sky Ridge Brewing, a composite craft brewery in Missoula, Montana, sells about 50,000 cases of canned beer a year to distributors across the Northwest, along with draft beer in its taproom. Its owners face two decisions this quarter. The first is whether to keep running the canning line they bought four years ago or to hire a mobile canning service that brings its own equipment and crew. The second is whether to accept an offer from a regional grocery chain to brew 6,000 cases of lager under the chain's own label at $19 a case, well below the $28 the brewery receives from distributors. This paper analyzes both decisions with relevant costs.
What Makes a Cost Relevant
A relevant cost is a future cost that differs between the alternatives under consideration (Datar & Rajan, 2021). Two kinds of cost are therefore irrelevant. Sunk costs, money already spent, is beyond the reach of any choice made now. Neither do amounts that stay identical whichever path is taken, such as an allocation of rent for space that will be paid regardless, do not help choose between them. The value of the best option passed over, an opportunity cost, also counts, though no ledger ever records it.
Decision 1: Keep the Canning Line or Hire a Mobile Service
The brewery paid $240,000 for its canning line four years ago; its book value is now $96,000. Cans and labels cost $3.60 a case under either option, because the brewery buys them in both cases, so they are excluded from the comparison.
Hiring the mobile service lowers relevant costs by about $59,500 a year once the freed space is used for barrel-aged beer, which the owners estimate would contribute $20,000 a year. In addition, selling the line now would bring a one-time $70,000. The line's book value, and the depreciation that would be recorded on it, play no part in the decision; they reflect money spent four years ago.
| Item | Keep the line | Mobile service | Relevant? |
|---|---|---|---|
| Canning labor, CO2, power and parts, $1.75 a case | $87,500 | 0 | Yes, avoidable |
| Line technician salary | $58,000 | 0 | Yes, the position would be eliminated |
| Maintenance contract | $14,000 | 0 | Yes, cancelable |
| Mobile canning fee, $2.40 a case | 0 | $120,000 | Yes |
| Contribution from barrel aging in freed space | 0 | minus $20,000 | Yes, an opportunity cost of keeping the line |
| Rent allocated to the canning area | $18,000 | $18,000 | No, paid either way |
| Depreciation on the line's $96,000 book value | $24,000 | 0 | No, reflects a sunk cost |
| Annual relevant cost | $159,500 | $100,000 | Difference of $59,500 |
Decision 2: The Private-Label Order
The grocery chain offers $19 a case for 6,000 cases of lager in its own cans, delivered over six months. The brewery is running at about 80% of capacity, so the order can be brewed without displacing regular production. Variable costs per case are $5.20 for malt, hops and yeast, $3.60 for cans and labels, $2.40 for mobile canning and $1.40 for excise taxes and delivery, a total of $12.60. Each case therefore contributes $6.40 toward fixed costs and profit, or $38,400 on the full order. Fixed costs such as the brewhouse lease and salaried brewers would not change, so they are irrelevant. On the numbers, the order should be accepted.
If the Brewery Were Full
The special order looks attractive only because capacity is idle. If the brewery were already running at capacity, the 6,000 cases would displace its own lager sold to distributors at $28, which carries variable costs of about $12.60 and contributes $15.40 a case. Giving up $15.40 to earn $6.40 would cost $9.00 a case, or $54,000 on the order. The same order can be right or wrong depending on what else the brewhouse would be doing, which is why capacity must be checked before any contribution is counted.
Honest Reporting of the Decision
Relevant cost analysis also raises an ethical point. Selling the canning line would produce a loss on disposal of $26,000, the difference between its $96,000 book value and the $70,000 sale price, and the owners worried that the loss would look bad to their bank. A loss on paper does not change the economics, and delaying a sound decision to protect a reported number would put appearances ahead of the business. The brewery should explain the loss in a note to its lender rather than avoid it.
Qualitative Factors
Numbers do not settle either decision. For canning, the mobile service sets its schedule across many breweries, so Big Sky Ridge would lose the ability to can a fresh release on short notice. Canning quality also matters: dissolved oxygen picked up during canning shortens shelf life, and the owners should test the service's results before committing. For the private label, the chain's lager would sit on the same shelves as the brewery's own lager at a lower price; if some customers switch, the lost contribution on the brewery's brand would offset part of the gain. The contract should specify a recipe distinct from the brewery's flagship and limit the term to one year.
Why the Owners Hesitated
The owners resisted selling the canning line, saying they had paid too much for it to give it up. That reaction is common. Thaler (1980) argued that people treat money already spent as a reason to continue using what they paid for, contrary to economic reasoning. Arkes and Blumer (1985) demonstrated this sunk cost effect in a series of experiments: in one, buyers of a theater's season tickets who had been charged the full amount went to more of the plays than buyers randomly given a discount, even though the money was spent either way. The owners' instinct to keep using an expensive line reflects the same effect. Recognizing it helps managers judge the line by what it will cost from now on.
Recommendations
First, Big Sky Ridge should run a three-month trial with the mobile service for its core brands, measuring dissolved oxygen and on-time canning, and sell the line if the trial succeeds. Second, it should accept the private-label order on a one-year contract with a recipe distinct from its flagship lager, and track its own lager's grocery sales during the contract. The canning recommendation would change if the mobile service raised its price above about $3.50 a case or could not meet the brewery's release schedule.
Conclusion
In both decisions, the relevant figures were the future costs and revenues that differ between choices. The canning line's book value and allocated rent did not matter; labor, technician, maintenance, the service fee and the value of freed space did. The private-label order contributes $38,400 because capacity is available. Understanding the sunk cost effect helped explain why the right answer felt wrong to the owners.
References
Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational Behavior and Human Decision Processes, 35(1), 124-140. https://doi.org/10.1016/0749-5978(85)90049-4
Datar, S. M., & Rajan, M. V. (2021). Horngren's cost accounting: A managerial emphasis (17th ed.). Pearson.
Thaler, R. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior and Organization, 1(1), 39-60. https://doi.org/10.1016/0167-2681(80)90051-7
Reading the BUS 510 Module 8 assignment instructions
Aspen's catalog for BUS 510 ends with using accounting data for strategic and management decisions with an emphasis on profitability, so a final module often asks students to weigh a choice like outsourcing, a one-off order or closing a product line using only the costs that change. Your classroom's Module 8 prompt gives the scenario; this example analyzes two decisions for one company. Say what counts as relevant and why money already spent, or shared costs that will continue regardless, stay out. Identify the alternatives clearly. For each, list the costs and revenues that differ, including opportunity costs and one-time items such as salvage value. Present the comparison in a table. Consider qualitative factors that numbers miss, such as quality, flexibility and customer relationships. Recommend a course and state the facts that would flip your answer.
How the BUS 510 Module 8 example is put together
The paper opens with Big Sky Ridge Brewing's two decisions. A section defines relevant costs as future costs that differ between alternatives. The canning analysis compares keeping the line, with labor, supplies, a technician and a maintenance contract totaling $159,500 a year, against a mobile service at $2.40 a case, or $120,000, and adds the $20,000 contribution from using the freed space for barrel aging and $70,000 from selling the line. The $96,000 book value and an $18,000 rent allocation are shown as irrelevant. The special order analysis finds $38,400 of contribution from 6,000 cases with spare capacity. Qualitative factors include canning schedules, oxygen pickup in the cans and whether the private label competes with the brewery's own lager. Arkes and Blumer's experiments and Thaler's theory explain the pull of sunk costs.
BUS 510 Module 8 rubric: what earns full marks
Relevant cost papers in an MBA accounting course are marked on correct identification of relevant and irrelevant items, accurate arithmetic, attention to qualitative factors and a clear recommendation. This example labels every item in the canning table as relevant or not, with the reason, so a grader can see that book value and allocated rent were excluded deliberately. Opportunity cost and salvage value are included and separated between annual and one-time effects. The special order analysis checks capacity before counting contribution, which students often forget. Qualitative factors are specific to brewing rather than generic. Arkes and Blumer's article in Organizational Behavior and Human Decision Processes and Thaler's article in the Journal of Economic Behavior and Organization explain why the owners resisted the numbers, and Datar and Rajan's text supplies the decision framework.
BUS 510 Module 8 help: mistakes that cost marks
The most common mistake in Module 8 is including sunk costs, such as the original price or book value of equipment, in the comparison. Past spending cannot be changed by today's decision. Another is treating allocated fixed costs as if they would disappear; ask whether each cost would actually change. Remember opportunity costs, such as the value of space or capacity freed by a decision. In special orders, check whether capacity is available; if the order displaces regular sales, their lost contribution is a cost. Separate one-time amounts from annual ones. Do not ignore qualitative factors, but do not let them replace the analysis either. Present the comparison in a table with both alternatives side by side. Finally, state what would change your recommendation, such as a higher service price or a capacity limit.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official Aspen University document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
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BUS 510 Module 8 questions, answered
What does BUS 510 Module 8 usually ask for?
Aspen's BUS 510 ends with relevant costs for management decisions, so analyzing a make-or-buy, special order or similar decision using only the costs that differ is typical. Follow your classroom prompt.
What is a relevant cost?
A future cost that differs between the alternatives being considered; costs that are the same under every alternative, or already spent, are irrelevant to the decision.
Why is book value irrelevant to keeping or replacing equipment?
It reflects money already spent, which no decision today can recover; only future cash flows, including any salvage value, matter.
Where can I find a free BUS 510 Module 8 sample paper?
The complete analysis appears above: a brewery's canning make-or-buy decision and a private-label special order analyzed with relevant costs, qualitative factors and research on sunk costs.
When should a company accept a special order below its normal price?
When the price exceeds the variable costs of filling it, capacity is available, and the order will not undermine regular sales or customer relationships.