Contents 1:0 TO IDENTIFY THE RELEVANT CASH FLOWS TO EVALUATE THE PRODUCTION OF THE NEW SECURITY RIGHT 1 1.1 OPORTUMNITY COST 1 1.2 CASH FLOWS VS PROFIT 2 1.3 WORKING CAPITAL 2 1.3 OVERHEARDS 2 1.4 SUNK COST 2 2.0 A REPORT ON THE RECOMMENDATION IF THE PROJECT IS ACCEPTED OR REJECTED 3 3.0 TO CALCULATE THE NET PRESENT VALUE OF THE NEW PRODUCT USING GLOW PLC 3 4.0 TO CALCULATE THE INTERNAL RATE OF RETURN 4 5.0 TO WRITE A REPORT ON THE ADVISABILITY OF ACCEPTING THE CONTRACT AND ANY
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Super Project Case 1. The relevant cash flows for General Foods are the following: sales and cost of goods sold for the Super project, erosion of Jell-O contribution margin, selling expenses, income tax, capital expenditures, opportunity costs for using excess agglomerator capacity, and increases in the net working capital. a. Test-market expenses, which were included in the first period, are sunk costs because they had been already expensed for feasibility of the Super project. Therefore, the management
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revenue differences, cost differences and cost saving differences. While undertaking incremental analysis, the three different costs to be considered are sunk costs, relevant costs and opportunity costs. Sunk costs are those which are not relevant for decision making. They are incurred indifferent to the alternative course of action. Relevant costs are those which need to be considered for decision making. They vary between the alternatives. Opportunity costs is the cost of choosing one alternative
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difference between alternatives is to identify the differential costs and revenues. (Horngren et al, 2008) The differential costs and revenues analysis is called incremental analysis. By examining all the relevant costs and revenues Guillermo can decide which alternative to choose and, therefore, to obtain the greatest contribution possible. The company will use the contribution to pay the unavoidable costs. The unavoidable costs will remain the same regardless of any decision, so the key is picking
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very hard decision for companies to make. In this paper I will discuss what takes place when making such an important decision to increase production and save the company money. This paper will include an executive summary, definition, factors or cost, measurement, analysis and summary. Executive Summary Should a company hire temporary workers or hire full-time workers to handle increase demand for the company’s product? Companies are constantly facing some of the most demanding situations due
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nations. ANS: A PTS: 1 DIF: Medium NAT: Reflective Thinking 2. Assume that a cargo ship carrying the merchandise of a cloth merchant has been wrecked. Such a setback will be accounted as the merchant’s: a. sunk cost. b. deadweight loss. c. marginal cost. d. opportunity cost. ANS: A PTS: 1 DIF: Medium NAT: Reflective Thinking 3. Jane regularly sends funds to organizations seeking to save endangered animal species. This is an example of: a. fairness. b. altruism. c. selfishness
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Accounting profit, Economic profit, Implicit costs and Explicit costs Such slogans as “buy low, sell high” or “never give a sucker an even break” echo people’s expectations that firms try to maximize their profits. Profit maximization is the standard economic assumption used to analyze the behavior of firms. Profit is a firm’s total revenue minus its total cost; loss is incurred when revenue fails to cover costs. Profits are positive, while losses are negative. Although, economists
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Precision Worldwide, Inc. Introduction When a competitor develops and introduces a superior product that is less costly to manufacture and even many times usable and durable, the key to people at Precision Worldwide must decide whether to match the competitor's product, when to do so, how to price or what sustainable competitive advantage it needs to adopt during the next strategic period, given that it holds a large inventory of its now inferior product. This issue concerns the steel and plastic
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transaction cost. Firms emerge to economize on repetitive contracting and consumers seek to have bundles of services under one transaction. The hotel will attract more clients by having entertainment opportunities and gambling possibilities at hand and the gamblers will more likely go to a place with entertainment and good food and lodging. There is in effect a transfer price between the Hotel and Entertainment divisions and the Gambling division. To reflect a good approximation of opportunity
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Organizing a Cost- Reduction program The Bottom Line * You need a multidisciplinary team to attain significant cost- reduction. Support from the top helps greatly. * Encounter resistance to the cost reduction effort * There are risks associated with cost – reduction opportunities * Meet at least once a week * Maintain an action plan to create and sustain reduction momentum. * Someone who writes well and is good in capturing details should take notes and publish meeting minutes no later than
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