A student has a choice of 2 different full-time summer jobs for 12 weeks: Job 1
ID: 2465526 • Letter: A
Question
A student has a choice of 2 different full-time summer jobs for 12 weeks:
Job 1 is an office job - wages are $600 per week
cost of office job:
Gas: $40 per week
Parking: $20 per week
Lunch: $35 per week
Clothes: $350 one time cost
Laptop Computer: $600 one time cost
Job 2 is a lifeguard job at Jones Beach - wages are $220 per week.
costs of lifeguard job:
Gas: $20 per week
Lunch: $20 per week
1- Comment and answer:
a- The quantitative (net cost analysis) answers to your decision above
b- Name the qualitative factors that might influence you to choose the less paying job.
2- Identify, define and discuss the following with specific reference to above options:
a- Avoidable costs
b- Constraints
c- Differential costs
d- Relevant costs
e- Sunk costs
Explanation / Answer
Particular Job 1 Job 2 Wages to be received $600 $220 Less:Variable cost Gas $40 $20 Parking $20 Lunch $35 $20 Clothes $350 Contribution $155 $180 Decision: Job 2 is giving more benifit because it is giving the benifit of $180 on the other side Job 1 is giving $155 and also in job 1 there is another fixed cost of $600 Therefore job 2 is more beneficial Avoidable cost: the cost that can be avoided by simply not producing the product unlike fixed cost. for example if we choose job 2 then we can avoid the cost of Parking and cloths. Differencial cost: it is the difference in cost of two alternative. In the given example the variable cost of job 1 is 445 and the job 2 is $40 Relevent cost : it is the cost which is relevent in decision making , that may be imprtant in one situation but irrelivent for another. Sunk cost:sunk cost is the cost that has already been incurred and now irrelevent in decision making.
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