Explain batch-related and product-sustaining activities

Reference no: EM13169535

Question

Your company is interested in having a new facility constructed. The contractor expects that it will take approximately 3 years to complete the building. The contractor has offered you three payment plans for the building. They are as follows:

Time	Plan 1	Plan 2	Plan 3
Today	$300,000	$1,035,000	$950,000
1 year from now	$1,300,000	$1,035,000	$0
2 years from now	$1,300,000	$1,035,000	$1,600,000
3 years from now	$1,300,000	$1,035,000	$1,600,000

The CFO of your company has asked you to provide recommendation concerning which payment plan to accept. What is your recommendation? Assume your weighted-average cost of capital is 10%.

Question

List and describe four "red flags" that may indicate you should consider revising your overhead allocation system.

Question

a) Describe the differences between unit-related, batch-related, and product-sustaining activities. Give one example of each type of activity.

b) Describe the difference between transaction drivers and duration drivers. When would one type be preferred over the other?

Reference no: EM13169535

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