Reference no: EM13376708

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?