Two years ago a large corp. gegan construction on a new site. At that time, mgrs thought that production from that plant would generate over $25 million in sales. However, a more conservative and realistic estimate suggests that the new plant will only generate an additional $20 million in sales. Over the past two years, the corp. has spent $15 million on construction of the plant. Another $10 million is needed to complete the facility. Should the mgrs scrap the project or move forward. Explain

To determine whether the managers should scrap the project or move forward, we need to compare the expected benefits (sales) with the costs.

First, let's calculate the total costs of the project. The corp. has already spent $15 million on construction, and it needs an additional $10 million to complete the facility. So, the total cost would be $15 million + $10 million = $25 million.

Next, let's compare the expected benefits. Initially, the managers thought the plant would generate over $25 million in sales, but the more conservative estimate suggests that it will only generate an additional $20 million in sales.

Now, we can compare the expected benefits with the total cost. If the expected benefits are greater than or equal to the total cost, then it would make sense to move forward with the project. However, if the expected benefits are less than the total cost, it might be advisable to scrap the project.

In this case, the expected benefits are $20 million, which is less than the total cost of $25 million. Therefore, the managers should scrap the project.

Explanation:

To determine whether to scrap the project or move forward, we compared the expected benefits (sales) with the total cost of the project. By calculating the costs and comparing them with the benefits, we can make an informed decision.