Edwards Restaurant Supplies is investigating the possibility of adopting a lean production philosophy throughout their organization. Estimated costs to set up the computer system are $650,000; training employees in lean production is estimated to cost $175,000; and the general expenses of establishing the program are estimated at $35,000. The estimated value of the potential savings is $975,000. Do the benefits outweigh the costs or do the costs outweigh the benefits, and by how much?
A) Costs outweigh benefits by $150,000.
B) Benefits outweigh costs by $150,000.
C) Costs outweigh benefits by $115,000 .
D) Benefits outweigh costs by $115,000.
52) Gilmore Corporation is investigating the possibility of adopting a lean production philosophy in its manufacturing facilities. The plant manager has done a cost-benefit analysis and has found that the costs of the lean production program exceed the benefits by $115,000. You analyze the situation and make some adjustments to the cost estimates. After doing your analysis, you find that costs still outweigh benefits by less than 5%. Which might be a sound course of action?
A) Consider dropping the plan.
B) Look for ways to lessen costs.
C) Re-evaluate the value of benefits.
D) All of the above should be considered.
53) Chesrown Motors is considering whether or not to expand into a new area of the US. They produce high-end motorcycles with moderate gas mileage, but have developed a new technology to increase the mileage of their bikes. They will need to spend $175,000 to retrofit a building to incorporate the new fuel technology. New worker training will cost $84,000. Other expenses involved in getting the new plant up and running amount to $32,000. Cagle anticipates that, with gas price increases, the profit potential of this expansion is $388,000. Do the benefits outweigh the costs or do the costs outweigh the benefits, and by how much?
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