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Norma-Jean [14]
3 years ago
5

Chris Suit is administrator for Lowell Hospital. She is trying to determine whether to build a large wing on the existing hospit

al, a small wing, or no wing at all. If the population of Lowell continues to grow, a large wing could return $150,000 to the hospital each year. If a small wing were built, it would return $100,000 to the hospital each year if the population continues to grow. If the population of Lowell remains the same, the hospital would encounter a loss of $85,000 with a large wing and a loss of $45,000 with a small wing. Unfortunately, Suit does not have any information about the future population of Lowell.
Business
1 answer:
nalin [4]3 years ago
5 0

Answer:

A) Expected monetary value (EMV) is how much money you should expect to receive from different options. The EMV of both options are:

  • EMV large wing = (50% x $150,000) - (50% x $85,000) = $75,000 - $42,500 = $32,500
  • EMV small wing = (50% x $100,000) - (50% x $45,000) = $50,000 - $22,500 = $27,500

Since the EMV of the large wing is higher, then the large wing is the best alternative.

B) If the likelihood of the population growing reduces to 40% and the likelihood that it will remain unchanged increases to 60%, then the new EMVs for both options are:

  • EMV large wing = (40% x $150,000) - (60% x $85,000) = $60,000 - $51,000 = $9,000
  • EMV small wing = (40% x $100,000) - (60% x $45,000) = $40,000 - $27,000 = $13,000

Now the EMV of the small wing is higher, then the small wing is the best alternative.

C) EVPI is the expected value of perfect information, that means how much you are willing to pay to get the information you need to avoid any possible loss or increase your gains.

EVPI = EVwPi - highest EMV

EVwPi = (highest possible outcome of situation 1 x probability of situation 1) + (highest possible outcome of situation 2 x probability of situation 2)

  • situation 1 is the wing being built, and the highest possible outcome is $150,000 when the population grows.
  • situation 2 is not building anything at all, and the highest possible outcome is $0 when the population doesn't grow.

EVwPi = ($150,000 x 40%) + ($0 x 60%) = $60,000

EVPI = $60,000 - $13,000 = $47,000

This means that Chris would be willing to pay a maximum of $47,000 to know the perfect information about what investments should be carried out by the hospital.

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Answer:

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Explanation:

Giving the following information:

Cost Machine Hours

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Variable cost per unit= (75,000 - 52,200) / (29,000 - 20,000)= 2.53

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3 years ago
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Explain one method economics and business people use to help them make business decisions?
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Answer:

A cost-benefit analysis involves subtracting the sum of all the business costs from the business benefits.

Explanation:

Business is the act of exchanging goods and services for commercial purposes. The main aim of conducting a business for most people is to increase sales and make profit. In order to do this, there are business decisions that go into the running of business that determine how the business will perform. Most of these decisions if taken into account can lead to overall business success. There are different methods in economics that can aid a business person to make a decision, however, in this case we will consider the cost-benefit analysis as a tool of economics that can be used to make business decisions.

As indicated above, a cost-benefit analysis is a method that businesses often use to arrive at decisions. The analysis is done by first assigning monetary units to all the activities and processes that will go into the business. The total costs are then calculated from all the expenditures that will be incurred in the business. The benefits are then calculated from all the revenue expected to be got from the business. The costs are then subtracted from the benefits. The result can be either zero, negative or positive. A zero result implies that the business will break-even, there will be no losses or profits. A negative value implies that the business will go to a loss thus not advisable to venture in it. A positive result shows that the business will be profitable therefor it would be beneficial to venture into it.

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uses the weighted-average method in its process costing system. In their first processing department, the company worked on 1,05
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Answer:

The % of completion of the ending inventory in work-in-process with respect to conversion cost is: 40%.

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The % of completion = Equivalent units of Ending Work in Process Inventory/ Physical units in Ending Work in Process Inventory × 100

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