Share
Explore BrainMass

Managerial Decisions

Describe in economic terms a managerial decision....Should our company hire temporary workers or hire new workers to handle increase demand for our product? Should we buy a new machine or upgrade the old one?
What is the optimal level of parts we should order and keep on the shelf?
Should we lease or buy a car? Should we rent or buy a house? Should I start a new business?

Each question above is answered in a single sentence. The answer has implications influencing future actions, ie. the answer is meaningful and useful. Use clear economic language in a manner that demonstrates understanding of cost benefit analysis, briefly explain the economic terms and concepts. Include a description of...above...detail the understanding of the process

Further define a managerial question to be analyzed. Identify opportunities and alternatives being evaluated. Describes and identify factors or costs that will influence the analysis Includes factors and costs that may seem important (and are important for other questions) and explain why they are not important to this question. Limit answer to ten most important factors or costs (you should have at least this many).
(3 implicit and 3 explicit costs) *Two should not be important to this question and at least six should be important to answering this question.

Demonstrate your understanding of what makes a cost or factor relevant to economic reasoning.Measure how factors or costs from the previous section are to be measured and the values you plan to use in your analysis (or range of values). State the reliability of the number. For example, I don't expect you to include every possible value of a factor, you may make assumptions. If you make an assumption about a number how likely is it to change, and/or how comfortable are you with the stability of the number.

Demonstrate your ability to apply economic reasoning and not get the correct answer (or politically correct answer). If you apply good reasoning, your answer may be wrong because of a poor assumption, that is acceptable. With experience, your ability to make good assumptions will improve. Use the measurements from above and apply good economic reasoning and solve the problem. Explain what method you're going to apply and why this method is appropriate (This is to demonstrate that you understand the economic concepts).

States your observations about the process. You have an answer, based upon the reliability of the measurement of the factors or costs how likely is that answer to change. You may want to identify some (not more that three) assumptions that if their value were different would give a different answer. For example, buying a house versus renting may the choice when interest rates are 5%, but if they go to 20%, renting may be the better choice.

Solution Preview

Make a Managerial Decision

Describe in economic terms a managerial decision....Should our company hire temporary workers or hire new workers to handle increase demand for our product? Temporary workers, Hiring temporary workers increases the variable cost, on the other hand hiring permanent workers will increase the fixed costs. Should we buy a new machine or upgrade the old one? Up gradation, buying a new machine increases the fixed cost; the up gradation also increases the fixed cost but that which can be changed in a shorter period of time.
What is the optimal level of parts we should order and keep on the shelf? The optimal level of parts we should order is the point where the marginal cost of ordering and keeping the parts is equal to the marginal revenue of keeping the parts on the shelf. (MR= MC)
Should we lease or buy a car? If net present value of the lease payments is more than the cost of buying the car, it should be bought. Otherwise it should be leased. Should we rent or buy a house? If the net present value of the rent paid for the house is more than the price of the house the house should be bought. Should I start a new business? Yes, if it earns more profit than if the money were invested.

Each question above is answered in a single sentence. The answer has implications influencing future actions, ie. the answer is meaningful and useful. Use clear economic language in a manner that demonstrates understanding of cost benefit analysis, briefly explain the economic terms and concepts. Include a description of...above...detail the understanding of the process
Marginal costs are change in total costs divided by ...

Solution Summary

Managerial Decision are discussed very comprehensively in this explanation..

$2.19