1. Discretionary costs are troublesome because managers usuallyfind it difficult to separateand quantify the results of their ise in business. As compared with variable and other fixed costs.

You are required to discuss the above statement and include in your answerthe meaning of discretionary costs, variable costs and fixed costs; give two illustrations of each of these three named costs. (12)

1. A drug company has initiated a research project which is intended to develop a new product. Expenditures to date on this particular research total R500 000 but it is now estimated that a furtherR200 000 will need to be spent before the product can be

marketed. Over the estimated life of the product the profit potential has a net present value of R350 000. You are required to advise management whether they should continue to abandon the project. Support your conclusion with a numerate statement and state what kind of cost is the R500 000. (10)

Opportunity costs are not recognized by financial accounting systems but need to be considered in many decisions taken by management. You are requiredto explain brieflythe meaning of opportunity costs and give two examples to illustrate the meaning you have attachedto this.