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Unformatted text preview: Chapter 13: Relevant Cost & Short Run Decision Making Exercises Exercise 1: Sandy is considering moving from her apartment into a small house with a fenced yard. The apartment is noisy, and she has a difficult time studying. In addition, the fenced yard would be great for her dog. The distance from school is much the same from the house and from the apartment. The apartment costs $750 per month, and she has two months remaining on her lease. The lease cannot be broken, so Sandy must pay the last two months of rent whether she lives there or not. The rent for the house is $450 per month, plus utilities, which average $100 per month. The apartment is furnished; the house is not. If Sandy moves into the house, she will need to buy furniture immediately. She located the furniture at a discount store for $500. 1) Identify the irrelevant costs associated with Sandys decision to stay in the apartment or move to the house? 2) Identify two qualitative factors? Exercise 2: Sherrell owns a successful hole-in-the-wall bagel shop called Bobcat Bagels. Sherrell wants to expand the shop by leasing the space next door for $500 per month, and adding tables and chairs so customers can dine in. She figures that the tables and chairs will cost $5,600 and that the bagel machine, that cost $3,500 five years ago, would need...
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