Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • Discussion Question Week 7

    Uploaded by

    lethuytinh705
    3 views2 pages
    This document contains summaries of four different scenarios involving cost-benefit analyses to determine the most effective option: 1) A company considering whether to sell saplings or small trees, finding that processing them into small trees would increase profits. 2) Analyzing profits from refining gold and silver from ore, finding refining is not profitable compared to selling the raw ore. 3) Comparing retaining an old aircraft or replacing it, finding replacing would reduce operating costs over four years. 4) Weighing options for housing in Canada of renting or buying, and factors like monthly costs, down payment, interest, and potential rental income or bank interest.

    Original Description:

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    This document contains summaries of four different scenarios involving cost-benefit analyses to determine the most effective option: 1) A company considering whether to sell saplings or small trees, finding that processing them into small trees would increase profits. 2) Analyzing profits from refining gold and silver from ore, finding refining is not profitable compared to selling the raw ore. 3) Comparing retaining an old aircraft or replacing it, finding replacing would reduce operating costs over four years. 4) Weighing options for housing in Canada of renting or buying, and factors like monthly costs, down payment, interest, and potential rental income or bank interest.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    3 views2 pages

    Discussion Question Week 7

    Uploaded by

    lethuytinh705
    This document contains summaries of four different scenarios involving cost-benefit analyses to determine the most effective option: 1) A company considering whether to sell saplings or small trees, finding that processing them into small trees would increase profits. 2) Analyzing profits from refining gold and silver from ore, finding refining is not profitable compared to selling the raw ore. 3) Comparing retaining an old aircraft or replacing it, finding replacing would reduce operating costs over four years. 4) Weighing options for housing in Canada of renting or buying, and factors like monthly costs, down payment, interest, and potential rental income or bank interest.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 2

    Sell or process further decision

    I think we only need to compare the costs and profits of the current operation (selling
    saplings) with the expansion (selling small trees):
     The current operation generates a profit of $2/unit with costs of $2/unit.
     After processing further, the costs would increase as follows: $1 (direct materials) +
    $1 (direct labor) + $0.50 (variable manufacturing overhead) + $0.25 (fixed
    manufacturing overhead) = $2.75/unit.
     The total cost for the expansion would be: $2 + $2.75 = $4.75/unit.
     The resulting profit would be: $7 - $4.75 = $2.25.
    => Since $2.25 > $2, this option is cost-feasible and can be pursued as it would lead to
    an additional profit of $0.25/unit.

    Multiple products

     Current sales: Ten pounds of ore for an average price of $5,000 and a profit of
    $2,500.
     Gold:
     Sales: 2 ounces of gold x $2,250 = $4,500
     Cost: $450 + $800 + $150 + $200 = $1,400 x 2 = $2,800
     Profit: $4,500 - $2,800 = $1,700
     Silver:
     Sales: 3 ounces of gold x $500 = $1,500
     Cost: $200 + $250 + $60 + $200 = $510 x 3 = $1,530
     Profit/Loss: $1,500 - $1,530 = -$30
     Total profit for refining: $1,670.
    => Since the profit from product after refining is $1,670 < $2,500. It is not profitable for
    processing the ore further.

    Repairing, retaining, or replacing equipment

     Retaining current/old plan: Variable operating costs for 04 years: $10 million x 4 =
    $40 million
     Replace and buy new plan:
     Variable operating costs: Variable operating costs for 04 years: $6 million x 4 =
    $24 million
     Purchase new plan: $110 million
     Sell old plan: $5 million
     Sell new plane: $90 million
     The cost: $40 million
    => Since the cost from the buying new plane is $39 million < $40. It is cost-effective to
    invest a new plane.
    Question 1: All of these analytical methods are fascinating to me. They all focus on the
    effectiveness of the proposed activities by considering either costs or profits. These are
    real-world problems that a manager often encounters in business operations.
    Question 2: Apart from decisions within business operations, in our daily lives, we also
    frequently contemplate whether to maintain old devices like laptops or phones or even
    make decisions such as buying a house or renting one. For example, currently, I'm in
    Canada, and I'm weighing the choice between renting a house for the whole family at
    around $3,000 per month or buying a house and paying the bank around $5,000 per
    month (potentially renting out the basement for about $2,000 per month). I also need to
    consider whether to put around 35% as a down payment for a $1,000,000 house, which
    amounts to $350,000; the remaining part would be financed with monthly payments of
    about $5,000 for both principal and interest. Alternatively, I could use the $350,000 to
    deposit in a bank, receive monthly interest, and continue renting. Note: We all know that
    money loses value over time, while the value of a house may appreciate after a certain
    period.
    Question 3: I feel entirely comfortable when doing calculations like these.
    Question 4: I believe I haven't performed well on the second quiz in class. I plan to
    allocate more time for practice and achieve a better score on the final quiz.

    You might also like