Economics: Marginal Cost and Relevant Costs

What is the primary purpose of calculating marginal cost for a business?

If a company increases production by one unit, which cost is directly impacted according to the definition of marginal cost?

A construction firm has already invested $1 million in an office building and now needs an additional $0.5 million to complete. The firm is now evaluating if the sale price is worth the additional cost. What type of cost is relevant in this scenario?

A clothing store is deciding whether to close some stores and rebrand. What should be considered as part of the 'relevant costs' for this decision?

What is the primary characteristic of differential cost?

A company has a choice between buying one of two new machines. One machine costs $10,000 and the other $12,000. What do we call the cost difference of $2000 in this scenario?

In a production setting, when a manager is making decisions about product mix and pricing, which cost would be most helpful?

A company is trying to decide whether to accept a special order, what would be 'relevant costs' in this situation?

When is the concept of differential cost most applicable?

In the context of a hotel renovation, what does the differential cost represent?

According to the content, how would you describe the nature of variable costs?

What defines a fixed cost within the context of business operations?

In the example given, what would be a typical variable cost?

What is the defining characteristic of a mixed cost?

What could be an example of a differential cost when deciding between newspaper ads and social media marketing?

When considering driving versus taking the bus, what does differential cost entail?

Which of the following best describes a sunk cost?

According to the provided information, which of the following is an example of a sunk cost?

Which statement is true regarding sunk and fixed costs?

What is the primary reason sunk costs are not considered when making future business decisions?

What is opportunity cost?

Using the equation provided, calculate the opportunity cost if Option A provides $10,000 return, and Option B (the one chosen) provides a return of $7,000?

Based on the cost information for part manufacturing, what is the total variable cost per unit?

In the provided example of the manufacturing costs, if the company is operating at 80% capacity with no future use of the remaining 20%, which cost is considered irrelevant for deciding whether to produce additional units?

A company is deciding whether to manufacture a part or buy it. The cost to manufacture includes direct materials (Rs. 4), direct wages (Rs. 7), variable overhead (Rs. 3), and allocated fixed costs (Rs. 8). What is the total cost to manufacture one unit of the part?

Virat Mfg. Ltd. is currently operating at 80% capacity. They can purchase a part for Rs. 9.25 per unit. If they manufacture the part, their per-unit costs are: Material Rs. 4, Wages Rs. 3, and Factory Overhead Rs. 2. The company can manufacture 80,000 of these parts if operating at full capacity. If the company can only consider variable costs, what amount should be used for the 'make' cost per unit?

A company is considering purchasing a machine for Rs. 100,000 with an 8-year useful life and a salvage value of Rs. 12,000, or leasing it for Rs. 2,000 per month. The company can also earn 14% on investments if they don't purchase the machine. If the company does purchase, they would borrow at 10%. What is the opportunity cost using the companies usual business investment rate of purchasing the machine?

Ashi Ltd. is evaluating different sales mixes. To make the best decision, what type of cost information should be presented to the board?

Virat Mfg. Ltd., when calculating the cost of the part it produces, includes fixed costs as 20% of its total costs per unit. What is the danger of including fixed costs in a 'make or buy' calculation?

A company is considering leasing vs buying a machine. The company will borrow at 10% to purchase, but could otherwise invest at 14%. Which is the correct approach?

Ashi Ltd. is deciding between multiple sales mixes for their two products. How should the company decide which is the most profitable mix?

If a company is operating at less than full capacity, and considering manufacturing a part rather than buying it, which of these factors is most important?

What is the marginal cost per unit for Product A?

Which of the following production plans yields the highest contribution, given the described costs and prices for products A and B?

What is the total marginal cost for producing one unit of Product B?

Regarding the new machine proposal, what is the annual labor cost associated with the existing machine?

If the existing machine produces 24 units per hour, what will be the total units produced annually if the machine works for 2000 hours?

What is the total annual cost for consumables for the new machine?

What is the total variable cost per unit for Product A in the second scenario?

What is the total annual power cost for the existing machine?