At the End of Each Month, a Research and Development

question 29

Essay

At the end of each month, a research and development team writes status reports for the projects worked on during the month. The team leaders, Andrew and Julie, submit the reports to the R&D director on the first Monday of each month. It is late Friday evening and to their surprise, they have discovered that the month ends on Sunday and the reports are due on Monday morning. They have decided to come to work early Saturday morning, so they can finish the reports before Monday morning. They split the work as follows: Andrew will write and edit the reports while Julie collates data and draws all the necessary graphs. Assume that Julie starts her work on a report as soon as Andrew is finished with it and that Andrew works continuously. Times for the reports in hours) are as follows:
$$\begin{array} { c c c } \text { Projects } & \text { Andrew } & \text { Julie } \\\text { A } & 4 & 2 \\\text { B } & 3 & 5 \\\text { C } & 5 & 1 \\\text { D } & 7 & 3 \\\text { E } & 8 & 6\end{array}$$
a. What is the order of the projects using Johnson's rule?
b. How many hours will it take them to finish all the reports?
c. How many hours is Andrew idle?
d. How many hours is Julie idle?

Evaluate the relevance of variable and fixed costs in specific decision contexts.

Discern the impact of sunk costs on decision making and clarify that they are never relevant.

Recognize the necessity of differential cost analysis without necessarily preparing a complete income statement.

Apply the concept of activity-based costing to determine relevant costs.

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Definitions:

Federally Declared Disaster Area

An area officially designated by the Federal Emergency Management Agency (FEMA) where significant damage has occurred due to natural or man-made disasters, making it eligible for federal aid.

Casualty Loss

A loss resulting from a sudden, unexpected, or unusual event such as a natural disaster, theft, or accident.

Taxpayer

An individual or entity that is obligated to pay taxes to a federal, state, or local government based on income earned, property owned, or consumption.

Casualty Loss Deduction

A tax deduction that allows taxpayers to deduct losses caused by sudden, unexpected or unusual events such as natural disasters, fires, or thefts.