Discussion board postings.

Please response to these for classmate discussion board posting. 

1. This is a controversial situation as a compromise for the two partners I would honestly consider offering the services for a month or two to see how and if the demand grows before adding variable costs of the costs addressed by the second partner would be a one fixed cost the offer advertising, business cards could be considered variable in a sense, but there would only one cost for repainting the vehicles and signs. There may be monthly costs for yellow page ads and business cards. With the revenue increase these expenditures will actually be covered and personal advertising saves the company largely and expands their territory.

2. There are going to be several aspects that these partners are going to need to consider when deciding if they should change the name of their business. The first partner wants to change the name to include Lawn and Tree care. His argument for this is that it would bring in new business by putting in the name that they do more than just lawn care. This would cause more customers to use their services which would improve their bottom line. But the second partner bring up the idea that by changing the name they would incur a whole bunch new relevant costs with changing the name. As he points out these relevant costs would include the need to change all of their signs, vehicles, business cards and ads. The partners would need to find out how much the change in name might make them in additional revenue and then compare it to the relevant costs. They would then have to make the decision on if the name change is worth the incurred costs. Another way in which the partners might be able to find a way to compromise it to maybe have the name changed in a 6 month or year time frame. At this point they will be needing to renew their ad in the yellow pages as well as needing to order new business cards as they would have gone through them. This would change these two costs to irrelevant costs as they would need to be done either way. This would leave the only other relevant costs to be changing the signage and the vehicles. By evening out the costs it can make the change from in name less expensive to transition over to but allow them to still bring in the additional customers in the long run.

3.Contribution is defined in our text by the excess of incremental revenues over incremental costs contributing to the companies fixed and unavoidable or necessary costs, hopefully total revenues should exceed total costs (Douglas 2012). Another definition is the selling prices and direct variable costs that affect specified products or services. Contribution analysis displays if a firm would be constrained by said fixed and variable costs hindering profits. For example, I open a business that specializes in selling clothes wholesale, I decide to hire a woman that can offer alterations for my customers. With this in mind I may need to purchase more business cards at the cost of $30.00 for a 3 month supply. This added service charges a minimum of $40.00 to $100 for specific alterations, estimating that she does a minimum of 5 alterations a month and charge her ten dollars a month. I would definitely see a profit in revenue regardless with a $20.00 profit and that just if she receives the minimum a mount of customers.

            This analysis shows that the implementation of this added service and labor guarantees me a profit in the short-term view so the average variable cost is absolutely worth the investment. The incremental costs for the decision made with the average variable costs would identify the positive and negatives of the decision to include alterations to my wholesale clothing business. Now with the short-term analysis completed I could conclude that the long-term investment cold only benefit my company assuredly. This diminishes any uncertainty uses this method and confirms that I should incorporate the service into my business without any doubt on revenues increasing for both of us in the long-run.

References:

Douglas, E. (2012). Managerial Economics (1st ed.). San Diego, CA: Bridgepoint Edu

4.    Contribution analysis is a form of cost–benefit analysis where the costs are confined to incremental costs and the benefits are confined to incremental revenues (Douglas, 2012). Occasionally a company is confronted with unplanned events which call for the use of decision-making tools beyond those found in the basic accounting methods which is where the use of a contribution analysis can be be a great aid in the decision making process. More and more company's are entertaining spur of the moment decisions that can act as a vehicle to further opportunity and increase revenues. In order to be able to explore these spur of the moment opportunities contribution analysis address the problem of identifying soft, or overhead costs associated with varying production projects. Generally, contribution analysis  aids a company by accounting for all known fixed, direct and variable costs and then subtracting that amount from revenues. The remainder is viewed as the volume of other costs which, though hard to pin down, actually contribute to production (Friesner, 2014). For example a large firm may use a contribution analysis to gain the knowledge of how to receive the most revenue from a project. Such information is valuable if a firm were to consider a contract offer for a special order. The aim of the contribution analysis is to be to base the company’s pricing on a contribution margin.

            Most recently, today, my wife and I went to the doctor thinking that we knew that we were having a new baby. Well it turns out that we are having twins, we found out today. So now we need to sit down and allocate new costs for two babies instead of one, plus all of the already fixed costs that are incurred at this moment. As wonderfully joyful the news is, financially it just became increasingly harder to make it work on the proposed planned budget. With new opportunities of employment, family and friend help, and more shifts at my current job a new contribution analysis can be derived form opportunity ceased. The extra revenue that we had already allocated for new baby needs, now needs to be re-evaluated for two. It is sometimes in spur of the moment opportunities that results can be obtained as first desired, it may take longer than previously stipulated in order to obtain them. 

References:
Douglas, E. (2012). Managerial Economics (1st ed.). San Diego, CA: Bridgepoint Education.
Friesner, T. (2014). Contribution Analysis. Retrieved from: http://www.marketingteacher.com/contribution-analysis