Juanita earns $68,000 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 $ 68,000
Annual tuition and fees 14,000
Annual book and supply expense 3,000
Monthly living expenses in Mexico City 800
Monthly living expenses in Halifax 1,600
Monthly auto expenses in Mexico City 350
Monthly auto expenses in Halifax 350
Cost of two business suits purchased just prior to resigning 600
Moving expenses 5,500
a) Calculate the following in the context of Juanita’s decision:
(i) Total sunk costs (if any) (2 marks)
(ii) Total annual differential or incremental costs (if any) (4marks)
(iii) Total annual 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? (1 mark)
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.
Know the meaning of each cost category well
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