Midterm
1. Opportunity costs are most simply defined as cost in terms of foregoing alternatives. This means what you potentially lose in making a choice for one thing in a decision. Stella would need to be aware that whatever resources she allocates to paying for the new car, will be removed from using them for other purposes. She should consider how much the car will cost in comparison with the other uses for her funds combined with the cost of another means of transportation. In short, for this to be a good choice, the cost of the car should be lower than the cost of the alternative uses + the cost of alternate transportation if she wishes to maximize this decision. http://wordnetweb.princeton.edu/perl/webwn?s=opportunity%20cost 2. In regards to which method should be used, I would make my choice based on the cost of the method. This means that I would be looking to put the cheapest labor option in to use. To determine this I calculated the cost of each option.
Method 1 Cost – 20x10 + 10x100 = $1,200
Method 2 Cost - 50x10 + 2x100 = $700
Method 3 Cost - 100x10 = $1,000
Method 4 Cost - 10x10 + 12x100 = $1,300
After determining that method 2 is the cheapest method, I would suggest that the trucker use method 2.
3. I feel that Enron’s biggest problem was the misappropriation of its profit and revenue. They did not do all they could to ensure that their fixed costs were covered while simultaneously managing their money. Instead they were victim of accounting fraud, frivolous spending, and corrupt management. Even simply replacing their upper management could have done wonders in preventing their fate. However, no amount of change can fix the damage that was caused by their misuse of company money for personal gain, and their all-around mindset (too big to fail).
4. I do not think these fixed costs can be ignored at all. However, if they must be ignored at