Question

While making long-term investment decisions regarding production and manufacturing, Parker Hannifin should take into account

1.cost of research and development.

2.corporate overhead.

3.its past pricing policies and profitability.

4.price sensitivity of the customer when purchasing its products.

Answer 1

Answer is 1.Cost of research and Development

While developing a new product or when deciding about long term investment in producing and manufacturing a product,its cost of research and if found successful cost of development should be taken into account

Only R& D (research and development) activities help in arriving at Investment decisions(whether to produce or not)

Only through research, viability of new product is determined and cost of development helps in pricing the product and estimating the profitability of the product.

So for Long term Investment decisions in producing and manufacturing a product should involve adequate research and development considering all relevant factors that may affect the profitability of the business in the long run

All other options are inappropriate because Corporate Overhead is just kind of administrative costs which will not affect production decisions and past pricing policies and profitability are not useful for developing an entirely new product in the market and also Price sensitivity of the customer is used for pricing decisions after developing a product and not for investment decisions in production and manufacturing.Pricing decisions come later.They do not affect Investment decisions