Week 3
Discussion
DQ 1 Relevant Costs. Two partners own together a small
landscaping business in North Carolina, called Summer Lawn Care. They have been
specializing in summer grass seeding, installation, and maintenance. Recently,
the partners acquired special technology and know-how for winter grass
installations and maintenance. They also added a tree cutting service as recent
storms in the area had caused demand for this service to soar. One of the
partners insists that the name of the business should change to Lawn and Tree
Care, so that it better reflects the range of services and, thus, generates
more customer interest, and thus contracts. The second partner wants to keep
the old name and argues, “We have already paid for business cards, vehicle
paint, signage, and ads in Yellow Pages”. Evaluate the arguments of the two
partners. Explain and illustrate their points by identifying the relevant and
irrelevant costs for this decision.
DQ 2 Contribution Analysis. Explain what is meant by
“contribution analysis”. Carefully define the term and provide examples to
illustrate it.
