... having this authority to make decisions, each division manager was able to invest in capital that it felt was needed to maximize overall company profit. Each division manager is evaluated on ROI, which shows how much profit was generated from the capital invested. 2. Out-of-pocket costs are the payments (usually cash or obligations to pay cash) made for resources. Out-of-pocket costs can be the same as opportunity costs, but may not be the some because of imperfect markets and changes in the decision-making environment between when a resource was acquired and when it is used. The following is a calculation of the out-of-pocket costs to Birch Paper Company on the proposed bids. BIRCH PAPER COMPANY Per 1,000 boxes WEST PAPER CO: Out of pocket Cost to Birch $430 EIRE PAPER, LTD: $432 Less: Southern profit ($90*40%) $36 Thompson profit ($30-$25) 5 $41 Out of pocket cost to Birch $391 THOMPSON $480 Less: Southern profit ($280*40%) $112 Thompson profit ($480-$400) 80 $192 Out of pocket cost to Birch $288 3. The ...

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