Sandy is considering moving from her apartment into a small house with a fenced yard. The apartment is noisy, and she has a difficult time studying. In addition, the fenced yard would be great for her dog. The distance from school is much the same from the house and from the apartment.
The apartment costs $750 per month, and she has two months remaining on her lease. The lease cannot be broken, so Sandy must pay the last two months of rent whether she lives there or not. The rent for the house is $450 per month, plus utilities, which average $100 per month.
The apartment is furnished; the house is not. If Sandy moves into the house, she will need to buy furniture immediately.
She located the furniture at a discount store for $500. 1) Identify the
...irrelevant costs associated with Sandy decision to stay in the apartment or move to the house? 2) Identify two qualitative factors? Exercise 2: Sherrill owns a successful hole-in-the-wall bagel shop called Bobcat Bagels. Sherrill wants to expand the shop by leasing the space next door for $500 per month, and adding tables and chairs so customers can dine In.
She figures that he tables and chairs will cost $5,600 and that the bagel machine, that cost $3,500 five years ago, would need to be replaced with a larger machine costing $7,400. The old machine would be scrapped and has no resale value.
She projects a $5,000 Increase in sales each month and variable cost Is 50% of sales. 1) What Is not relevant to Sherrill decision of expanding Into the new space? 2) If Sherrill decides
to expand, how long will It be before she has a positive Impact on operating Income? Exercise 3: A company sells a climbing post for cats for $30 each.
It costs the company $14 of variable costs and $6 of fixed cost to produce the climbing post. A buyer offers to purchase 3,000 units at $18 each.
The seller will Incur special shipping costs of $2 per unit. If the special offer Is accepted and produced with unused capacity, what will be the Impact on Income? Now the buyer wants a special label added to each post. Additional cost of labels Is $1. 00 per post and a special machine costing $25,000 to affix the labels. After the order Is complete, the machine would be scrapped.
Should the special order be accepted and what would be the Impact on Income?
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