Great Southern Consultants Group's Computer System Has Been Down Several

question 60

Essay

Great Southern Consultants Group's computer system has been down several times over the past few months,as shown below.
Each time the system is down,the firm loses an average of $400 in time and service expenses.They are considering signing a contract for preventive maintenance.With preventive maintenance,the system would be down on average only 0.5 per month.The monthly cost of preventive maintenance would be $200 a month.Which is cheaper,breakdown or preventive maintenance?

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Definitions:

Activities

Activities refer to actions, tasks, or operations that are carried out by individuals or organizations, often aiming towards achieving specific goals or outcomes.

Direct Labor Efficiency Variance

A measure used in cost accounting to gauge the difference between the actual hours worked and the standard hours expected, multiplied by the standard labor rate, used in the production of goods.

Standard Direct Labor Cost

The predetermined cost of labor directly involved in manufacturing a product, based on expected wage rates and labor efficiency.

Favorable

A term often used in budgeting and financial reporting to indicate results that are better than expected or budgeted.