Log in
HomeClass Notes1,200,000CA670,000

ADM 2304 Lecture Notes - Lecture 4: Long-Distance Calling, Variable Cost, Behaviorism

42 views4 pages
School
University of Ottawa
Department
Administration
Course
ADM 2304
Professor
Tony Quon

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

E. g, suppose you are trying to decide whether to drive or take the train to portland to attend a concert. You have ample cash to do either, but you don"t want to waste money needlessly. > a variable cost is a cost whose total dollar amount varies in direct proportion to changes in the activity level. e. g, your total long distance telephone bill is based on how many minutes you talk. > a variable cost remains constant if expressed on a per unit basis. The cost per minute talked is constant. e. g, 10 cents per minute. > the proportion of variable costs differs across organizations e. g, a public utility with large investments in equipment will tend to have fewer variable costs. > direct materials is a true or proportionately variable cost because the amount used during a period will vary in direct proportion to the level of production activity.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related Documents

ECO100Y1 Lecture Notes - Lecture 1: Traffic Ticket, Sport Canada, Opportunity Cost
fuchsiafox414
ECO100Y1 Chapter Notes -Traffic Ticket, Sport Canada, Opportunity Cost
harlequinguinea-pig567
ECO101H1 Lecture Notes - Sunk Costs, Marginal Cost, Marginal Utility
chocolatewhale65

Related Questions

Opportunity cost is the value of the next best alternative in a decision. Imagine that you have $150to see a concert. You can either see “Hot Stuff” or you can see “Good Times Band.” Assume that you value Hot Stuff concert at $225 and Good Times’ concert at $150. Both concerts cost $150 per ticket, but it would take you a couple of hours to drive to Hot stuffs concert and you have to be in school (the next) morning for an exam. Good Times is right here in town. Explain how you would assess the opportunity cost of seeing Good Times in concert. What is the opportunity cost of going to Good Times’ concert?

You have tickets to a basketball game, which is an hour’s drive away. There’s a blizzard raging outside, and the game is being televised. You can sit warm and safe at home by a roaring fire and watch on TV, or you can bundle up, dig out your car, and go to the game. What do you do?

3a. What type of cost is your expenditure on tickets and why?

3b. Why is the cost of the ticket irrelevant to your current decision about whether to stay at home or go to the game? Explain.

3c. In general, in making a decision whether to attend the basketball game or not during a blizzard, does the person need to look at the benefits vs. the costs of attending the basketball game? If so, what are the benefits vs. the costs of attending the basketball game during a blizzard? In your opinion, should you attend the basketball game if a blizzard is raging outside? Why or why not? Explain.

Suppose you currently earn $19,000 a year. You are considering a job that will increase your lifetime earnings by $190,000 but that requires an MBA. The job will mean also attending business school for two years at an annual cost of $25,000. You already have a bachelor’s degree, for which you spent $80,000 in tuition and books.

Which of the above information is relevant to your decision on whether to take the job?

The relevant cost is the $50,000 tuition you pay for business school. The relevant benefit is the increase in lifetime earnings of $190,000.
The relevant costs are the $80,000 spent for the bachelor’s degree, the $50,000 tuition for business school, and lost wages from full-time employment. The relevant benefit is the increase in lifetime savings of $190,000.
The relevant costs are the opportunity cost of taking the job (forgone earnings from your current job) and other things you could have done with the money you need to pay for business school. The tuition for the bachelor’s degree is a sunk cost and is not relevant. The relevant benefit is the increased lifetime earnings of $190,000.
All the information given in the problem is relevant.