Which of the following are relevant cash flows and what type of cost would you categorize them as given all the cost terms covered in this chapter?
The CEO will spend 20% of his time on the new project so we will allocate 20% of his salary as a project cost.
The project’s forecast sales are based on a $500,000 test market
The project will require the addition of one administrative assistant
The project will utilize a facility we already own that can be rented out for $4,000 per month.
What are the potential differences in cash flow for a machine that is highly automated versus a machine that requires more employee supervision and ongoing input to run it? How will these different aspects of the new machine affect the final decision whether to replace the current machine?