Question

Juanita earns $65,000 annually as a marketing specialist in Mexico City, Mexico. She has applied for admission to the M.B.A program at Dalhousie University. If accepted, she will resign and move to Halifax, Nova Scotia. Juanita has assembled the following data to make the decision: Juanita's annual salary Annual tuition and fees Annual book and supply expense Monthly living expenses in Mexico City Monthly living expenses in Halifax Monthly auto expenses in Mexico city Monthly auto expenses in Halifax I Cost of two business suits purchased just prior to resigning Moving expenses $65,000 13,200 3,300 920 1,700 362 362 630 5,800 Required: a) Calculate the following in the context of Juanita's decision: Total sunk costs (if any) (2 marks) (11) Total differential or incremental costs (if any) (6 marks) (111) Total opportunity costs (if any) (2 marks) b) What is your best estimate of the total cost to Juanita of earning an M.B.A. degree if it will take her 12 months to complete the program? (5 marks) c). Suppose you are Juanita. What specific additional information would you need in order to make a rational decision to pursue and successfully complete the MBA program at Dalhousie? Explain. (4 marks)

Answer 1

Answer:

Step-by-step explanation

(a) (i) Total sunk costs

= Cost of two business suits purchased just prior to resigning

= $ 630

.

(ii) Total differential or incremental costs

= [(Monthly living expenses in Halifax - Monthly living expenses in Mexico City + Monthly auto expenses in Halifax - Monthly auto expenses in Mexico city) * Number of month] + Moving expenses + Annual tuition and fees + Annual book and supply expense

= [(1700 - 920 + 362 - 362) * 12] + 5800 + 13200 + 3300

= $ 31,660

.

(iii) Total opportunity costs

= Juanita's annual salary

= $ 65,000

.

b) Best estimate of the total cost to Juanita

= Total differential or incremental costs + Total opportunity costs

= 31660 + 65000

= $ 96,660

.

c) Specific additional information:

After getting an MBA degree Juanita will have substantial increase in annual income. AN MBA degree will her demand a better salary as compare to what she is earning now. Also, the knowledge she will gain from the course will also be a huge benefit for her, which will help her throughout her life.

Also, Juanita can opt for some part time job while doing her MBA which will decrease her cost burden.

Thus, Juanita should pursue and successfully complete the MBA program