The Next Three Questions Relate to the Following Scenario: Erica

question 4

Multiple Choice

The next three questions relate to the following scenario: Erica is planning a large surprise party for her best friend. She has developed the plan below which includes estimates of the time in hours) and cost necessary to perform each of the activities required.
$$\begin{array} { | l | c | c | c | c | c | } \hline \text { Activity } & \text { Predeces sor } & \begin{array} { c } \text { Normal } \\\text { Time } \\\text { (hrs) }\end{array} & \begin{array} { c } \text { Crash } \\\text { Time } \\\text { (hrs) }\end{array} & \begin{array} { c } \text { Norm al } \\\text { Cost }\end{array} & \begin{array} { c } \text { Crash } \\\text { Cost }\end{array} \\\hline \text { A. Create Guest List } & - - & 8 & 4 & \$ 200 & \$ 310 \\\hline \text { B. Send Invitations } & \text { A } & 2 & 1 & \$ 125 & \$ 150 \\\hline \text { C. Plan Decorations } & \text { A } & 8 & 6 & \$ 300 & \$ 370 \\\hline \text { D. Plan Menu } & \text { A } & 3 & 2 & \$ 150 & \$ 210 \\\hline \text { E. Shop } & \text { D } & 4 & 2 & \$ 475 & \$ 550 \\\hline \text { F. Prepare Food } & \text { E } & 5 & 3 & \$ 225 & \$ 475 \\\hline\end{array}$$

-To reduce the time for Activity F, Prepare Food, Erica can purchase some of the food from a caterer rather than cook it herself. As shown in the table above, this can reduce the time for Activity F by one or two hours, depending on how much catered food she purchases. What is the crash cost per hour for this activity?

• A) $225
• B) $475
• C) $250
• D) $125
• E) $83.33
• F) None of these, the answer is: ____________________

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Definitions:

Cost

The amount of money or resources expended to acquire an asset, achieve an objective, or operate a service.

LIFO Inventory Method

An inventory costing method where the last items purchased or produced are considered the first items sold; stands for Last-In, First-Out.

Oldest Inventory Purchase Costs

Refers to the costs associated with the earliest batch of products bought by a business, crucial for inventory valuation methods like FIFO (First-In, First-Out).

Cost of Goods Sold

This accounts for the direct costs attributable to the production of the goods sold in a company, including material and labor costs.