Answer:
a.The marginal (added) benefits of the proposed new robotics.
b. The marginal (added) cost of the proposed new robotics.
c. The net benefit of the proposed new robotics.
d. What should Ken recommend that the company do? Why?
-
Based only on this analysis, the company should keep the old robotics. The new robotics are too expensive and do not generate enough benefits.
e. What factors besides the costs and benefits should be considered before the final decision is made?
- increases in efficiency and reductions in manufacturing time.
Explanation:
Marginal cost benefit analysis refers to analyzing the additional benefits of a new project or activity compared to the benefits generated by an alternative project or activity.
In this case, both alternative should be evaluated as follows:
alternative 1 alternative 2 marginal
keep robotics change robotics benefits
revenue (in $446,000 $568,000 $122,000
today's $)
required invest. $0 -$227,200 -$227,200
old robotics $0 $73,000 $73,000
<u>sales value </u>
marginal benefits / losses -$32,200
