Toya M. Cornelious
Problem 1-8 Golf Specialties
A. GS should accept Kojos offer because they will see an increased profit of $90.00. At $3.50 per head, GS receives $375.00 profit. At $3.10 per head, GS receives $575.00 profit. This is offset by a $110.00 loss from the sale to Kojo. The result is a $90.00 net increase.
3.50x500=1750.00 4.25x500=2125.00 2125-1750=375.00 profit
3.10x600=1860.00 2.00x100=200 2125+200=2325.00-1865=465.00 profit
C. GS should consider opportunity cost before choosing to accept the deal with Kojo. If they choose to do business with Kojo, Kojo may want to purchase additional heads. If Kojo wanted 200 heads, the cost to manufacture would be $620.00. Kojo would pay $400.00. This represents a loss of $220.00 and negates the profit realized from the sale of the other 500 heads.
3.10x200=620.00 2x200=400 620.00-400.00=200.00 loss
Problem 1-10 Montana Pen Company
A. No, Montana pens should not choose to outsource the pens. While the cost of the 400 pens produced in China is going down 49 baht per unit, the cost of the 800 pens manufactured in Thailand is going up 27.5 baht per unit. The result would be an increase in cost to 187 baht a unit or 2400 baht more.
B. Montana pens should consider fixed cost, variable costs, and opportunity cost. Something a simple as shipping costs for the pens could add significant costs.
Problem 2-2 Negative Opportunity Costs
A. As described by Zimmerman, opportunity cost can be negative. If a company orders supplies for a special project that cannot be otherwise used, the opportunity cost is the resale value or scrap value of the supplies. If the company incurs a cost...