Managers Tend to Favour the Alternative That Makes Their Performance

Top management faces a persistent challenge to make sure that the performance evaluation model of lower level managers is A)focused on short-term performance. B)based solely on quantitative factors. C)not consistent with the decision model. D)consistent with the decision model. E)based only on future costs.

Pat, a pizzeria manager, replaced the convection oven just six months ago.Today, Turbo Ovens Manufacturing announced the availability of a new convection oven that cooks more quickly with lower operating expenses.Pat is considering the purchase of this faster, lower-operating cost convection oven to replace the existing one they recently purchased.Selected information about the two ovens is given below: Required: a.What costs are sunk? b.What costs are relevant? c.What are the net cash flows over the next 5 years assuming the Pizzeria purchases the new convection oven? d.What other items should Pat, as manager of the Pizzeria, consider when making this decision?