Question

. The first job offer is close to your parents’ house (they live in Winnetka which is 16 miles north of downtown Chicago). Your parents have offered to let you live at home for a year so you won’t have to incur expenses for housing, food, or cable and internet. This job pays $45,000 per year. The second job is far from your parents’ house, but close to downtown Chicago. However, you will have to rent a studio apartment with parking ($9,000 per year), buy your own food ($2,000 per year), and pay for your own cable and internet ($800 per year). This job pays $52,000 per year. You still plan to do laundry at your parents’ house once a week if you live in the city, and you plan to go into the city once a week to visit with friends if you live at home. Thus, the cost of operating a car will be about the same either way. In addition, your parents refuse to pay for your cell phone service ($680 per year) no matter which job offer you choose to accept. Requirements: 1. Based on the information provided above, what is the net difference between the two alternatives (salary, net of relevant costs)? (Worth 3 pts.) 2. What information is irrelevant? Why? (Worth 2 pts.) 3. What qualitative factors or information is relevant to your decision? (Worth 3 pts.) 4. Assume that you really want to take Job #2, what other quantitative and qualitative information will you need to incorporate into your decision beyond the costs originally listed? (Worth 5 pts.)

Answer 1

GIVEN DATA:

First job pays salary = 45000 ( incur expenses for housing, food, or cable and internet)

Second job pays salary =52000

rent =9000

cable tv =800

food = 2000

phone service = 680

REQURIED :

1.The net difference between the two alternatives (salary, net of relevant costs)?

2.Information is irrelevant?

3.Qualitative factors or information is relevant to your decision?

4.Assume that you really want to take Job #2, what other quantitative and qualitative information will you need to incorporate into your decision ?

SOLUTION:

1. Net difference between the two alternatives :

working note:

Alternative 2 : = salary - expenses  

= 52000 - 11800

= 40200

Therefore Net income for alternative 1 is 45,000$

Net income for alternative 2 is 40,200$

2.Information is irrelevant:

Information of cost identified with telephone is unimportant it will be brought about independent of which work he pick.

3.Qualitative factors :

Allowed to live for multi year in his folks home.

4.Other quantitative and qualitative information will you need to incorporate into your decision:

He need to incorporate the cost of working auto back and forth from his leased loft to the place of his activity.