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Consider each of the following independent situations.

A. The Purchasing Department has five purchasing agents that work full time and are paid a salary of $35,000 per year. Each purchase order takes about 90 minutes, and requires approximately $5 of forms and supplies. Each order also requires, on average, about 45 minutes of telephone or Internet time to check with potential suppliers. The company pays a flat monthly rate for telephone and Internet services. The depreciation on office equipment for the Purchasing Department is $3,000 per month.

B. El Munchies, a taco stand near the college, hires counter staff at the rate of $7.50 per hour. Each staff member knows that the hours vary each week depending on the amount of business that El Munchies expects. Food is purchased from a restaurant supplier on an "as needed" basis; there is about 4 days of perishable goods inventory on hand, and a month's worth of nonperishable goods (e.g., napkins, paper cups) in inventory. Utilities are paid on a monthly basis for the previous month's usage. El Munchies has a three-year lease on the building and parking lot. Each month, the restaurant buys newspaper and radio advertising for the coming month.

C. Jared Benning runs a lawn mowing service during the summers to help pay for his college expenses. Jared bought a power mower (it runs on gasoline and must have its oil changed monthly due to the volume of lawns mowed) and a gaspowered weed eater for trimming along the edges. Jared buys a season's worth of lawn mower oil at the beginning of summer because he can get a discount if he buys in bulk. From time to time, Jared has a commitment elsewhere. When that happens, a friend of his mows the yards that day; he and the friend have agree on a per yard fee for this. Jared owns a used pickup truck and uses it to haul his equipment from job to job.

Required

Classify the resources in each of the above situations as flexible or committed. If the resource is committed, determine whether it is committed for the short term or committed for multiple periods.

Corporate Finance, Finance

  • Category:- Corporate Finance
  • Reference No.:- M91619554

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