Chapter 7 Homework

Topics: Cost, Costs, Car and Driver Ten Best Pages: 2 (424 words) Published: February 24, 2012
Problem 7-5 Susan Crossing

a. If faced with the same dilemma as Susan, my first reaction would obviously be disappointment in the Focus after realizing the money she spent is lost. After that my thoughts would go to looking for the best solution after considering all the alternatives, with the end goal being to have a working, reliable vehicle.

b. Susan should buy the Honda Civic. Assuming the estimate for additional repairs is correct, the Focus would cost $2500, compared to the $2000 it would cost for the used Civic. The $5150 that she already spent on the Focus is irrelevant and sunk.

c. Qualitative Factor: After doing research, Susan might find that a Honda Civic is historically more reliable and has lower maintenance costs than a Ford Focus. This is an important qualitative factor, she doesn't want to end up with the same dilemma in a few months. Brand loyalty could also be considered when looking at qualitative factors.

Problem 7-7 Mahulena Carpet

a. Yes. Repeating the coloring process and selling it at full price they will break even. The additional incremental cost of $2 per yard will be soaked up in the $2 per yard profit they have in the selling price. Selling to Practical Home Solutions they will have a loss of $2400. Looking at it per yard, repeating the process and selling it at full price would make $2 more per unit than if they sold it at $8/yard to Practical Home Solutions.

b. I think choice would vary between executives. If I were the president of Mahulena, I personally would not accept the offer of $11 per yard. Although it would still yield a small profit ($1200, $1/unit) I don't think it is worth anyone associating my company with sub par, low quality carpet. Reputation and image of the company is a qualitative factor that should be considered when making decisions like this.

Problem 7-15 Gavin West

a. Based on Weight:Salmon$88000

b. Based on Sales Value:Salmon...
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