Two partners own together a small landscaping business in North Carolina, called Summer Lawn Care. They have been specializing in summer grass seeding, installation, and maintenance. Recently, the partners acquired special technology and know-how for winter grass installations and maintenance. They also added a tree cutting service as recent storms in the area had caused demand for this service to soar. One of the partners insists that the name of the business should change to Lawn and Tree Care, so that it better reflects the range of services and, thus, generates more customer interest, and thus contracts. The second partner wants to keep the old name and argues, “We have already paid for business cards, vehicle paint, signage, and ads in Yellow Pages”. Evaluate the arguments of the two partners. Explain and illustrate their points by identifying the relevant and irrelevant costs for this decision.
GUIDANCE: For this question review chapters 5 & 6. To provide some clarity, consider: (1) the time frames involved and the costs expended in the various timeframes; (2) what was purchased? are these cost a on-time or recurring? what is the subjective nature of the items purchased. (3) you can see how this is a situation that is likely to occur in real life, how would you handle it? (4) review Table 6.1: Summary of cost concepts for decision making from your text. (5) provide your reasoning here for the various item and the way you categorize the costs.
Douglas, E. (2012). Managerial Economics (1st ed.). San Diego, CA: Bridgepoint Education.
Explain what is meant by “contribution analysis”. Carefully define the term and provide examples to illustrate it.
GUIDANCE: For this discussion review chapter 6. To provide some clarity, consider: (1) a personal example, this may be similar to one that you chose for week 2, if so elaborate on it. (2) a professional/ business related (or industry-driven example). (3) consider: project comparisons, make-or-buy decisions, and take-it-or-leave-it decisions.
Douglas, E. (2012). Managerial Economics (1st ed.). San Diego, CA: Bridgepoint Education
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