Questions
LO 10.1Explain how to differentiate short-term decisions from long-term decisions of a business and the changes in analyses that influence these decisions.
LO 10.1Felipe’s Restaurant and Pie Shop needs help defining the costs for his business. He also wants to know which costs are relevant or irrelevant to his decision. Identify each cost as relevant or irrelevant. Then identify the type of cost (sunk, fixed, variable, or opportunity).
| Cost | Relevant or Irrelevant? | Sunk, Fixed, Variable, or Opportunity? |
|---|---|---|
| Rent | ||
| Baker wages | ||
| Felipe’s culinary school tuition | ||
| Berries for pies | ||
| Painting dining area last year | ||
| Felipe’s decision not to attend graduate school |
LO 10.3In “The Trouble with Outsourcing,” a Schumpeter column in The Economist, there is a statement of advice to companies, who outsource products or services: “they need to think harder about what is their core business, and what is peripheral.”5 What types of problems do you think they are talking about? In your answer, present at least five (5) problems that companies should consider when outsourcing products or services.
LO 10.3Many outsourced jobs have resulted in “offshoring” jobs, rather than using domestic outsourcing. If a U.S. company wants to offshore a service like customer service, for example, what are some of their considerations? In your answer, address offshoring disadvantages as compared with domestic outsourcing.
LO 10.4What type of qualitative issues should management consider if a quantitative analysis reveals that a segment should be dropped?