Question

Question 8

• Time: 27 minutes
• Total: 19 marks

Juanita earns $63,000 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	$63,000
Annual tuition and fees	13,400
Annual book and supply expense	3,500
Monthly living expenses in Mexico City	940
Monthly living expenses in Halifax	1,700
Monthly auto expenses in Mexico city	364
Monthly auto expenses in Halifax	364
Cost of two business suits purchased just prior to resigning	650
Moving expenses	5,950

Required:

a) Calculate the following in the context of Juanita's decision:

(i) Total sunk costs (if any) (2 marks)
(ii) Total differential or incremental costs (if any) (6 marks)
(iii) 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

с D E a Cost of two business suits $ 650 1 A B 1 2 i Sunk Cost 3 4 5 6 ii Living Expenses 7 8 iii Oppurtunity Cost 9 Mexico Haliflax Differential 940 $ 1,700 $ 760 $ Salary $63,000 10 14 11 b Annual tuitiion fees $ 13,400 12 Annual book and supply expenses $ 3,500 13 Living expenses 20,400 Auuto expenses $ 4,368 15 Moving expenses $ 5,950 $47,618 16 17 c Additional Information The need and relevance of the MBA Degree. Whether the MBA degree is actually 18 required or some other additional qualification would do. 19 The cost and benefit analysis on a long term basis 20 The type of college, whether it is renowned and offers good MBA Programs The career growth that the MBA will offer and whether it is better to do it from this 21 college or there as other colleges as well.