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Relevant and Non-Relevant Costs

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Relevant and Non-Relevant Costs

Please see attached. Must answer question and discuss item identified on attachment. Thanks

The decision that has been made is the decision of Wal-Mart to reduce its global procurement personnel by 250. Of this it is expected that 100 personnel will be reduced in China. Two relevant costs are the salaries that are paid to these employees and the company infrastructure being used by the company. The opportunity costs are the procurement opportunities Wal-Mart will miss because of reduced manpower and the need to purchase goods at higher costs because procurement professionals have been laid off.
The relevant cost of 250 personnel is estimated to be $12.5 million. The average salary of procurement personnel has been estimated at $50,000 per annum. The infrastructure costs are estimated at $10 million. The non-relevant costs of procurement opportunities missed is estimated to be $7.5 billion and the higher costs incurred because procurement ...

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Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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