BUS 254 Lecture Notes - Lecture 7: Fixed Cost, Opportunity Cost

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 254
• Professor: Raymond Leung

Document Summary

84,640 (2,800) (1,300) (80,000) (1,160: management should not buy wisco because if they do, net income will decrease by. ,160: initial total annual cost = ,640. New total annual cost = ,640 + ,000 = ,640. The decision would change as the opportunity cost makes it cheaper to buy wisco (net income increases by ,840): borealis manufacturing company should consider the impact on the environment when manufacturing wisco. Discontinuing division 3 is not a good idea because doing so will decrease net. Discontinuing division 4 is a good idea because doing so will increase net income by ,000. Net income total = ,000: income from operating w/ division 4 = 145,000. Total income from operating w/o division 4 = 167,000. *additional income w/o division 4 (167,000 145,000) = 22,000. If the company were to further process table cleaners, their profit would increase by. This tells us that the company made the wrong decision.