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Learning Goal: I’m working on a economics multi-part question and need an explan

by | Jun 20, 2022 | Economics | 0 comments

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Post #1
Any expenditure that can be regarded as preventable only when making specific business decisions is considered relevant. The costs incurred after a business decision has been made are relevant costs. Any cost that has already been paid or accounted for while making a business decision is irrelevant. As a business owner, cutting business expenses as much as possible is always a top goal. Irrelevant expenses can’t be avoided, thus relevant costs get more attention. When making significant decisions, business owners and decision-makers want to think about the costs involved. I founded a management firm ten years ago solely to oversee my daughter’s musical career. Her initial single release cost us approximately $5,000 in marketing costs. Physical sales, airplay, digital downloads, streaming, subscription radio, and other forms of success are all possible for every song. Physical sales and digital downloads were our major focus. Individuals are no longer purchasing CDs, hence physical sales were ineffective. Due to a number of circumstances, the single track did not do well, and the advertising was ineffective. We didn’t take into account all of the expenses. This would have been a lot easier process with the introduction of free social media marketing. I learned that properly marketing an artist requires a lot more than $5000 and we needed to wait until the artist had built a fan base, which would have helped the promotion succeed. Although the marketing campaign was unsuccessful, those costs represent a sunk cost since they cannot be recovered. Sunk expenses are a shark in the water when it comes to making good judgments. People frequently continue to commit time, energy, and money into something that will never succeed. In these situations, it’s usually best to cut your losses and go on. (Sherman, 2009).
Respond to #1
Post #2
Extent decisions are those that require you to decide the extent of that particular activity. Explanation: Pricing and production are extent decisions because the decision you choose to make will directly have an impact on your business. A decision regarding how much or how many of a product to produce. Break-even analysis refers to the point when total cost and total revenue are even. When a person or business is bringing in as much money as they are spending to maintain it, they have neither lost nor gained any money; they have broken even. Applying a break-even analysis to pricing. Pricing and production are extent decisions because they involve size and scale. Investment decisions, too, center on size and scale. Once a company has determined what’s needed to produce a quality product, then a break-even analysis can come into play. Extent decision is a decision regarding how much or how many of a product to produce. An extent decision requires the manager not only to choose whether or not to do something. But also to decide the extent of that activity. Examples are how many units to produce, what to spend on advertising, and how many employees to hire. Making extent choices are more complex than all-or-none, as the manager must first determine whether an activity is worthwhile and, then, the optimal level of that activity. The reason to which extent decisions are used for pricing and production as there are the variable cost factors that play a role in the decision process in comparison to a break-even analysis is a simple equation to determine if the company can make its money back on its cost.
Respond #2

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