BUS 5110-01 - AY2024-T3_ Week 5 of 8 Discussion _ Home
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According to Stobierski (2021), a budget is an essential tool for organizations to manage their income and
spending in order to make operational choices. It is forward-looking, with both short- and long-term forecasts.
Organizations also develop a "actual budget" to compare estimates with reality. A budget contains more
precise information about spending than a cash flow statement and is used to direct operations inside an
organization. The cash flow statement, on the other hand, provides a more detailed summary of money
movement into and out of the firm. Both documents serve complimentary functions in boosting the business's
performance.
When developing a financial plan for the company, budget planners must consider external factors such as
competitive pressures, legal obligations, and the state of the economy. According to Beers (2019), in order to
ascertain if a company has sufficient funds to function, expand, and turn a profit, a business budget is
important. Lack of a budget puts a company at danger of overpaying, underinvesting to compete, or running
out of emergency cash. In order to make a budget, one should investigate industry costs, calculate costs
using a spreadsheet, add additional money for unforeseen expenses, and seek for methods to cut costs.
Review and modify the budget on a regular basis. If you're looking to cut costs, think about switching
providers.
Businesses use budgeted income statements to predict and evaluate income and expenses, helping with
resource allocation and decision-making. These statements are usually broken down by month or quarter,
focusing on future projections and including figures like gross profit and net sales. A positive net income
indicates a financially viable strategy, while a negative net income would require a budget reassessment
(What Is a Budgeted Income Statement? (with an Example), 2022).
The sales budget is the first step in the careful process that goes into creating Procter & Gamble's yearly
income statement budget. According to Kelwig (2021), a sales budget is a financial plan that forecasts a
company's total income by estimating the number of products sold and the price at which they are sold. It
differs from sales forecasting and spending budgets. Sales budgets are essential for controlling spending and
establishing sales targets. They should have an income statement, a balance sheet, and a cash flow
statement. These components are essential for creating a solid sales budget.
This crucial element outlines the anticipated income from the sale of products or services, considering
variables including market demand, price policies, and historical data. The production budget, operating
expenses budget, and finally the SG&A (selling, general, and administrative) budget are all built upon the
sales budget.
The SG&A budget outlines the estimated expenditures associated with selling products, monitoring general
operations, and managing administrative responsibilities inside the firm. According to Tuovila (2020), SG&A
expenses appear on a company's income statement but are not directly tied to a single product. These
expenses are incurred throughout the day-to-day operations of a firm and are frequently targeted for cost
reduction by management. While SG&A expenses and operating expenses are closely related, there are
some technical differences.
Procter & Gamble may efficiently allocate resources, track performance against objectives, and make well-
informed strategic decisions to improve profitability and stimulate development in accordance with its overall
financial goals by thoroughly analyzing each facet of these budgets.
References
Beers, B. (2019). 6 steps to a better business budget
.
Investopedia. https://www.investopedia.com/articles/pf/08/small-business-budget.asp
Kelwig, D. (2021, November 9). What is a sales budget? Use, example, and purpose
.
Zendesk. https://www.zendesk.com/blog/sales-budget/
Stobierski, T. (2021, November 16). How to Prepare a Budget for an Organization: 4 Steps
. Business Insights
- Blog. https://online.hbs.edu/blog/post/how-to-prepare-a-budget-for-an-organization
Tuovila, A. (2020, May 17). Selling, General & Administrative Expense (SG&A)
.
Investopedia. https://www.investopedia.com/terms/s/sga.asp
What Is a Budgeted Income Statement? (With an Example)
. (2022). Indeed Career
Guide. https://www.indeed.com/career-advice/career-development/budget-income-
statement#:~:text=A%20budgeted%20income%20statement%20(sometimes
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Related Questions
You are meeting with your manager this afternoon. In preparation, she has asked you to calculate the cumulative MU for your department. At the meeting, the two of you will compare this to the overall MU goal set for your department. The cost of the opening inventory is $11.9. The retail value of the opening inventory is $33.5. The cost for the inventory you are expecting is $57.5. The retail value of those purchases is $121.9. Calculate the cumulative MU%. Do not include the % in your answer.
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Below are various statements about different budgeting techniques. Which is
false?
Master (static) budgets are prepared for a single level activity
b. Budget ratcheting tightens targets when performance fails to meet
the target by a predetermined percentage
c Budget lapsing prevents managers from hoarding funds
C.
d. Budget lapsing encourages managers to spend money regardless
of cost or value
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Below are various statements about different budgeting techniques. Which is false?
Budget ratcheting tightens targets when performance fails to meet the target by a predetermined
percentage
Budget lapsing prevents managers from hoarding funds
Master(static) budgets are prepared for a single level of activity
Budget lapsing encourages managers to spend money regardless of cost or value
None of the above
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Question
Asked Jun 23, 2020
1 views
Management of Ben Services identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is GHC 2500 and for entertainment is GHC 500. For group 2, the maximumamount they are willing to pay for room and board is GHC 1800 and forentertainment is GHC 750. Although Ben is not able to identify members of either group, it does know that each group values the components of the package differently. Assuming there are an equal number of members in each group and that the total membership in each group is a single individual. If the marginal cost of providing the service (room and board and/or entertainment) to each group is GHC 1000.
i. If AG Travel and Tour wants to charge a package price, what is the highest price it can charge? ii. What profit will AG Travel and Tour make if it…
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Q4. K&C Ltd. is working on a budget for the current year. The following information is
linked
to
budget
preparation:
1
Budgeted selling price per unit
Total fixed costs
=
=
SAR 450 per unit
SAR 275,000
Variable costs
Required:
You are required to prepare a flexible budget for 1,000, 1,500, 2,000, and 2,500 units.
=
SAR 150 per unit
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Case Study 1:
Nancy is leading a Scrum project for her organization. The project is to create new software for the Accounting Department. She is meeting with Tom, the director for the accounting department and the project team members to discuss the requirements of the project. Tom, Nancy, and the project team have identified all the requirements that Tom would like the app to have, but now Nancy wants to organize the list of requirements in a prioritized view.
Based on this scenario,What role does Tom play?What can the scrum team do to help Nancy and Tom at this point of the project?What is the list of requirements called?Who should be prioritizing the list of requirements in this scenario?Case Study 2:
Jason is a project manager for his organization, and he’s been asked to lead an XP project. This project will create a new app to rate restaurants in an area based on how romantic the restaurant is for couples on dates. Jason is meeting with his organization’s client, Sara, to discuss…
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HighFlyer Airlines wants to build new airplanes with greatly increased cabin space. This will allow HighFlyer Airlines to give passengers more comfort and sell more tickets at a higher price. However, redesigning the cabin means rethinking many other elements of the airplane as well, like engine and luggage placement, and the most efficient shape of the plane for moving through the air, which requires investment spending. The table below shows the level of R&D spending necessary to achieve different rates of return (due to higher ticket revenue).
Private Rate of Return
Level of R&D Spending
12%
$100
10%
$200
8%
$300
6%
$400
4%
$500
If the opportunity cost of financial capital for HighFlyer Airlines is 6%, how much should the firm invest in R&D?
Assume that the social rate of return for R&D is an additional 2% on top of the private return; that is, an R&D investment that had a 7% private return to HighFlyer Airlines would…
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Suppose that you are trying to make a decision regarding the purchase of a new machine for the plant that you are working on. You have three criteria to consider. First of all, in these hard times, the price of the machine is very important for you. On the other hand, the throughput rate is also very important for you since you are anticipating higher demand in the future and you should have enough production to satisfy the customer demand. Finally, energy consumption is an issue that your company is sensitive to not only for the cost issues but also green production seems to be very important particularly for your customers. You have decided to adopt the additive utility function for the overall utility from these three criteria. Thus, the next thing for you is to determine the relative weights of the criteria. Suppose you used Swing Weighting and obtained the following table as the result of the process. What is the weight of the price?
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Assume
you are the CEO of a company that has invested $5 billion in a COVID vaccine, but the
vaccine is not quite finished. At a recent company meeting, one of your colleagues reports that
there have been other vaccines coming on the market, and these are expected to reduce the
sales of your vaccine to $3 billion. If it would cost you $1 billion to finish the development of the
vaccine and make the product, should you go ahead and do so? What is the most you should
pay to complete the vaccine?
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Direct Labor Budget
So now we need to determine our direct labor needs. Direct labor
includes all of the employees who are required to actually manufacture
the shoes. These are the people working on the production floor. This
information is important, so they don't run into a labor shortage and can
plan for potential adjustments in their labor needs. Another use for this
budget is to schedule plant shutdowns for cleaning and maintenance.
Without the completion of the other budgets we have done, we couldn't
fill in all the blanks in the direct labor budget!
So what new information might we need to complete this budget? Well
the biggest one is how much time does it take to complete a pair of
shoes? Then we need to know our cost per hour for our direct labor.
This cost per hour includes wages, payroll taxes and fringe benefits for
each of our production employees. Don't forget those things, as they
can make a huge impact on the cost of an employee per hour!
Direct Labor Cost/unit in each…
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Imagine that you own one of several popular restaurants in your area. Due to the Covid Pandemic of 2020, all restaurants were forced to close down for two months. You are now allowed to reopen your restaurant to the public. During this time, labor costs were reduced however, overhead such as rent, electricity, etc. was still a large percentage of your total costs. You are facing a dilemma; you are short on funds.
What options should you consider? For example, should you raise menu prices to make up for the lost revenue? Should you lower menu prices to attract more customers? Is your customer volume elastic? If you raise prices and the customer volume falls will the increase in prices compensate for the loss of volume? If it does not, is there some way you can make up the revenue shortfall? If you lower menu prices and revenue falls is there some way you can increase your business revenue?
Explain your reasoning in terms of demand and elasticity.
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Your company has invested $5 million in developing a new product, but the development process isn’t quite complete. You have just learned from your marketing team that other companies have introduced similar products. As a result of this competition, the expected sales of your new product once you have completed development and actually begun production is now just $3 million. Your production team tells you that it will cost another $1 million to finish development and make your product. The decision is now yours: should you give the go-ahead to complete development of the product? Why or why not? In the event that your production team’s cost estimate is inaccurate, what is the most that your company should pay to complete development? Why? Be sure to incorporate (and define) the relevant concept into your answer.
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When marginal cost is greater than marginal benefit at the current activity level, the decision maker can increase net benefit by decreasing the activity because
total cost will fall by more than total benefit will fall.
net benefit is upward sloping at this point.
marginal cost is rising faster than marginal benefit is falling.
total benefit will rise by more than total cost will rise.
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You are serving as the chair for your community's annual wellness campaign. A key event is the annual Walk 3k, Run 10k, Ride 20k event. The event is staged entirely by volunteers and the goal is to attract community-wide awareness of getting active as a key step to wellness. In other words, the goal is not to raise money, but to prompt awareness. As the chair, you set a financial goal to break even on the one and only cost of the event, a fitness bag with the community seal and the event motto, “I AM ON THE RIGHT TRACK!”
The cost of the bags, which must be ordered in batches of 100, are:
Bags
Fixed Cost
Variable Cost
Total Cost
Marginal Cost
0
$1,700
$ -
$1,700
100
$1,700
$500
$2,200
[a]
200
$1,700
$1,200
$2,900
[b]
300
$1,700
$2,700
$4,400
[c]
400
$1,700
$5,200
$6,900
[d]
500
$1,700
$9,000
$10,700
[e]
600
$1,700
$15,000
$16,700
[f]
700
$1,700
$23,800
$25,500
[g]
800…
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You are serving as the chair for your community's annual wellness campaign. A key event is the annual Walk 3k, Run 10k, Ride 20k event. The event is staged entirely by volunteers and the goal is to attract community-wide awareness of getting active as a key step to wellness. In other words, the goal is not to raise money, but to prompt awareness. As the chair, you set a financial goal to break even on the one and only cost of the event, a fitness bag with the community seal and the event motto, “I AM ON THE RIGHT TRACK!”
The cost of the bags, which must be ordered in batches of 100, are:
Bags
Fixed Cost
Variable Cost
Total Cost
Marginal Cost
0
$1,700
$ -
$1,700
100
$1,700
$500
$2,200
200
$1,700
$1,200
$2,900
300
$1,700
$2,700
$4,400
400
$1,700
$5,200
$6,900
500
$1,700
$9,000
$10,700
600
$1,700
$15,000
$16,700
700
$1,700
$23,800
$25,500
800
$1,700…
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The owner of Tommy's Technicians has found that his shop is losing money and he is in jeopardy of going out of business. Sales have remained constant for quite some time and now he is looking at ways to cut expenses to stay in business. Which of the following expenses is his best choice to try to immediately reduce and save him meaningful dollars so he can remain in business? (Hint: First consider which ones he has ultimate control over?)
Rent expense
Utilities expense
Payroll expense
Shop insurance expense
Advertising expense
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model of a firm that produces final goods using R&D and components as inputs, with cost data as follows:Assembly: Total cost of production = PAQA = 400Earnings of High-Skilled Labor = WHHA = 100Earnings of Low-Skilled Labor = WLLA = 200Earnings of Capital = RKA = 100R&D: Total cost of production = PRQR = 400Earnings of High-Skilled Labor = WHHR = 175Earnings of Low-Skilled Labor = WLLR = 125Earnings of Capital = RKR = 100A) In which factor(s) is assembly intensive? In which factor(s) is R&D intensive?B) Suppose that due to the opening of trade, the price of assembly falls by ∆PA/PA = −20%, the price of R&D remains unchanged, ∆PR/PR = 0%, and capital’s share earnings remains constant.C) What has happened to the relative wage of high-skilled/low-skilled labor? Does this match the predictions of the offshoring model?
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Your answer is partially correct.
A state department of health is considering a public awareness campaign to encourage vaccination. It determines that the cost of this
campaign would be $760,000 per year for the next 6 years. It estimates that the campaign would reduce rates of illness and
communicable disease. At the end of the first year of the campaign, the resulting savings would be $1,150,000; the savings would
decrease by $120,000 each of the following 5 years. Assuming a discounting factor of 8%, compute the benefit cost ratio.
Click here to access the TVM Factor Table calculator.
Yes
Carry all interim calculations to 5 decimal places and then round your final answer to two decimal places. The tolerance is ±0.01.
Would you recommend the department of health launch the public awareness campaign?
1.05
eTextbook and Media
Hint
Assistance Used
Assistance Used
Draw the cash flows of both the benefits and the costs. Use these to compute the present worth of both the benefits and the…
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Which of the following would depict the logical order or sequence for preparing the following:(1) a production budget, (2) a cash budget, (3) a sales budget and (4) a direct-labour budget?
Multiple Choice
1, 3, 4, 2
2, 3, 1, 4
3, 4, 1, 2
3, 1, 2, 4
3, 1, 4, 2
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A lobbyist in our nation’s capitol must buy 250 votes in the House of Representatives and Senate to win passage of a bill to add Millard Fillmore’s face to Mount Rushmore. Votes in Congress can be purchased according to the following process: V = CM/100,000, where C is the number of dollars contributed to campaign funds and M is the number of three-martini lunches. If three-martini lunches cost $25 each, what is the smallest expenditure the lobbyist could make to ensure Mr. Fillmore’s proper place in history?
Option A) 1,000,000
Option B) 25,000,025
Option C) 130,000
Option D) 50,000
Option E) 25,000,000
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Yakov lives in Montreal and runs a business that sells boats. In an average year, he receives $793,000 from selling boats. Of this sales revenue, he
must pay the manufacturer a wholesale cost of $430,000; he also pays wages and utility bills totalling $301,000. He owns his showroom; if he
chooses to rent it out, he will receive $15,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if
Yakov does not operate this boat business, he can work as a financial advisor and receive an annual salary of $50,000 with no additional monetary
costs. No other costs are incurred in running this boat business.
Identify each of Yakov's costs in the following table as either an implicit cost or an explicit cost of selling boats.
Implicit Cost
Explicit Cost
The rental income Yakov could receive if he chose to rent out his showroom
The wholesale cost for the boats that Yakov pays the manufacturer
The salary Yakov could earn if he worked as a financial…
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Agree or Disagree and Why: One year ago, I loaned a friend $1000 and he just paid me back the whole $1,000. The loan did not cost me anything. An oil refinery bought millions of barrels of oil four months ago for $80 per barrel, compared to $120 / barrel today. The cost of using those barrels of oil to produce gasoline today is still $80.
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Key building blocks of good decision making include the ability to visualize, analyze, and verbally communicate ideas effectively. Large volumes of data can be particularly complex to understand and present. However, if data is visually presented through a combination of meaningful charts, text, and a verbal narrative, the intended audience can better engage in the discussion of the facts, patterns, and findings that must be acknowledged before moving to the decision-making stage.
You take on the role of a new restaurant owner who is checking on sales since the opening of your establishment in January. You have just downloaded the following sales data from your financial software: Module Four Discussion Sales Data Spreadsheet . It includes sales by food item for each month you have been in business. You would like to create visualizations that illustrate which items are selling well and how the business is doing month by month.
What have you been able to identify through the visual…
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Adidas produces shoes for sale at Macys, JC Penny and Footlocker. The company makes a few different design of shoes from high-end to low end. The manager, Eric, is interested in using a Level Aggregate Plan for production. Inventories and back orders will be used to handle demand fluctuation. As an Operations Manager, you have been asked to develop an Aggregate Plan. Use the data provided below to answer this questions.
Cost Data
Regular-time labor cost (hrs)
11
Overtime labor cost (hrs)
18
Subcontracting cost per unit (labor only)
84
Holding cost per unit per period
12
Back-order cost per unit per employee
21
Hiring cost per employees
600
Firing cost per employees
450
Capacity Data
Beginning workforce (employees)
215
Beginning inventory in units
2000
Labor standard per units in hrs
6
Regular time available per period (hrs)
160
Overtime available per period (hrs)
32
Subcontracting maximum per period in…
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Question Mary and Jason are a new couple trying to understand their family production plans.
Suppose they conduct two types of production: household production (HP) and market production
(MP). If Mary carries out household production, her production value is equivalent to $20 each
hour. If she does market production, she gets paid $15 each hour. Jason's production value is $12
per hour if he does household production. If he does market production, he gets paid $25 per hour.
Assume Mary and Jason each work 8 hours on a typical workday.
a) Calculate and depict Mary and Jason's daily production possibilities.
b) Assume Mary and Jason conduct market production, only. Calculate and depict the family
production possibility. If they wish to keep some household production, who shall do it,
and what will be the new production possibility? Show it in a graph.
c) Alternatively, if Mary and Jason conduct household production only, what would be the
family production possibility? If they wish to…
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Which of the following is true regarding line-item budgets?
a. Line-item budgets refer to to budgets that authorize the manager to spend
only up to the specified amount on each line item
b. Line-item budgets reduce agency problems
C.
All of the answers are correct
d. Line-item budgets reduce possible managerial opportunism and are
prevalent in governments
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Look at the photo for prompt.
In order of effectiveness (net effect change in rGDP)), order these actions; base your reasoning on actual numbers. Show your calculations.
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Related Questions
- You are meeting with your manager this afternoon. In preparation, she has asked you to calculate the cumulative MU for your department. At the meeting, the two of you will compare this to the overall MU goal set for your department. The cost of the opening inventory is $11.9. The retail value of the opening inventory is $33.5. The cost for the inventory you are expecting is $57.5. The retail value of those purchases is $121.9. Calculate the cumulative MU%. Do not include the % in your answer.arrow_forwardBelow are various statements about different budgeting techniques. Which is false? Master (static) budgets are prepared for a single level activity b. Budget ratcheting tightens targets when performance fails to meet the target by a predetermined percentage c Budget lapsing prevents managers from hoarding funds C. d. Budget lapsing encourages managers to spend money regardless of cost or valuearrow_forwardBelow are various statements about different budgeting techniques. Which is false? Budget ratcheting tightens targets when performance fails to meet the target by a predetermined percentage Budget lapsing prevents managers from hoarding funds Master(static) budgets are prepared for a single level of activity Budget lapsing encourages managers to spend money regardless of cost or value None of the abovearrow_forward
- arrow_forward Question Asked Jun 23, 2020 1 views Management of Ben Services identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is GHC 2500 and for entertainment is GHC 500. For group 2, the maximumamount they are willing to pay for room and board is GHC 1800 and forentertainment is GHC 750. Although Ben is not able to identify members of either group, it does know that each group values the components of the package differently. Assuming there are an equal number of members in each group and that the total membership in each group is a single individual. If the marginal cost of providing the service (room and board and/or entertainment) to each group is GHC 1000. i. If AG Travel and Tour wants to charge a package price, what is the highest price it can charge? ii. What profit will AG Travel and Tour make if it…arrow_forwardQ4. K&C Ltd. is working on a budget for the current year. The following information is linked to budget preparation: 1 Budgeted selling price per unit Total fixed costs = = SAR 450 per unit SAR 275,000 Variable costs Required: You are required to prepare a flexible budget for 1,000, 1,500, 2,000, and 2,500 units. = SAR 150 per unitarrow_forwardCase Study 1: Nancy is leading a Scrum project for her organization. The project is to create new software for the Accounting Department. She is meeting with Tom, the director for the accounting department and the project team members to discuss the requirements of the project. Tom, Nancy, and the project team have identified all the requirements that Tom would like the app to have, but now Nancy wants to organize the list of requirements in a prioritized view. Based on this scenario,What role does Tom play?What can the scrum team do to help Nancy and Tom at this point of the project?What is the list of requirements called?Who should be prioritizing the list of requirements in this scenario?Case Study 2: Jason is a project manager for his organization, and he’s been asked to lead an XP project. This project will create a new app to rate restaurants in an area based on how romantic the restaurant is for couples on dates. Jason is meeting with his organization’s client, Sara, to discuss…arrow_forward
- HighFlyer Airlines wants to build new airplanes with greatly increased cabin space. This will allow HighFlyer Airlines to give passengers more comfort and sell more tickets at a higher price. However, redesigning the cabin means rethinking many other elements of the airplane as well, like engine and luggage placement, and the most efficient shape of the plane for moving through the air, which requires investment spending. The table below shows the level of R&D spending necessary to achieve different rates of return (due to higher ticket revenue). Private Rate of Return Level of R&D Spending 12% $100 10% $200 8% $300 6% $400 4% $500 If the opportunity cost of financial capital for HighFlyer Airlines is 6%, how much should the firm invest in R&D? Assume that the social rate of return for R&D is an additional 2% on top of the private return; that is, an R&D investment that had a 7% private return to HighFlyer Airlines would…arrow_forwardSuppose that you are trying to make a decision regarding the purchase of a new machine for the plant that you are working on. You have three criteria to consider. First of all, in these hard times, the price of the machine is very important for you. On the other hand, the throughput rate is also very important for you since you are anticipating higher demand in the future and you should have enough production to satisfy the customer demand. Finally, energy consumption is an issue that your company is sensitive to not only for the cost issues but also green production seems to be very important particularly for your customers. You have decided to adopt the additive utility function for the overall utility from these three criteria. Thus, the next thing for you is to determine the relative weights of the criteria. Suppose you used Swing Weighting and obtained the following table as the result of the process. What is the weight of the price?arrow_forwardAssume you are the CEO of a company that has invested $5 billion in a COVID vaccine, but the vaccine is not quite finished. At a recent company meeting, one of your colleagues reports that there have been other vaccines coming on the market, and these are expected to reduce the sales of your vaccine to $3 billion. If it would cost you $1 billion to finish the development of the vaccine and make the product, should you go ahead and do so? What is the most you should pay to complete the vaccine?arrow_forward
- Direct Labor Budget So now we need to determine our direct labor needs. Direct labor includes all of the employees who are required to actually manufacture the shoes. These are the people working on the production floor. This information is important, so they don't run into a labor shortage and can plan for potential adjustments in their labor needs. Another use for this budget is to schedule plant shutdowns for cleaning and maintenance. Without the completion of the other budgets we have done, we couldn't fill in all the blanks in the direct labor budget! So what new information might we need to complete this budget? Well the biggest one is how much time does it take to complete a pair of shoes? Then we need to know our cost per hour for our direct labor. This cost per hour includes wages, payroll taxes and fringe benefits for each of our production employees. Don't forget those things, as they can make a huge impact on the cost of an employee per hour! Direct Labor Cost/unit in each…arrow_forwardImagine that you own one of several popular restaurants in your area. Due to the Covid Pandemic of 2020, all restaurants were forced to close down for two months. You are now allowed to reopen your restaurant to the public. During this time, labor costs were reduced however, overhead such as rent, electricity, etc. was still a large percentage of your total costs. You are facing a dilemma; you are short on funds. What options should you consider? For example, should you raise menu prices to make up for the lost revenue? Should you lower menu prices to attract more customers? Is your customer volume elastic? If you raise prices and the customer volume falls will the increase in prices compensate for the loss of volume? If it does not, is there some way you can make up the revenue shortfall? If you lower menu prices and revenue falls is there some way you can increase your business revenue? Explain your reasoning in terms of demand and elasticity.arrow_forwardYour company has invested $5 million in developing a new product, but the development process isn’t quite complete. You have just learned from your marketing team that other companies have introduced similar products. As a result of this competition, the expected sales of your new product once you have completed development and actually begun production is now just $3 million. Your production team tells you that it will cost another $1 million to finish development and make your product. The decision is now yours: should you give the go-ahead to complete development of the product? Why or why not? In the event that your production team’s cost estimate is inaccurate, what is the most that your company should pay to complete development? Why? Be sure to incorporate (and define) the relevant concept into your answer.arrow_forward
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