Exam 10: Relevant Information for Decision Making

Guillory Company produces a part that has the following costs per unit: Homeland Corporation can provide the part to Guillory for $23 per unit. Guillory Company has determined that 50 percent of its fixed overhead would continue if it purchased the part. However, if Guillory no longer produces the part, it can rent that portion of the plant facilities for $70,000 per year. Guillory Company currently produces 12,000 parts per year. Which alternative is preferable and by what margin?

A fixed cost is relevant if it is

In linear programming, resource constraints are usually expressed as inequalities.

Which of the following variables is associated with the "less than or equal to" constraints?

Kenwood Electronics Corporation Kenwood Electronics Corporation manufactures and sells FM radios. Information on the prior year's operations (sales and production Model A1) is presented below: Refer to Kenwood Electronics Corporation. The Model B2 radio is currently in production and it renders the Model A1 radio obsolete. If the remaining 500 units of the Model A1 radio are to be sold through regular channels, what is the minimum price the company would accept for the radios?

Fixed costs are ignored in allocating scarce resources because

Relevant costs are

Which of the following are relevant in a make or buy decision?

An outside firm selected to provide services to an organization is called a

When a company discontinues a segment, total corporate costs may decrease in all of the following categories except

Henke Company has only 30,000 hours of machine time each month to manufacture its two products. Product X has a contribution margin of $60, and Product Y has a contribution margin of $72. Product X requires 6 hours of machine time, and Product Y requires 10 hours of machine time. If Thomas Company wants to dedicate 85 percent of its machine time to the product that will provide the most income, the company will have a total contribution margin of

Which of the following items continuously checks for an improved solution from the one previously computed?

____ programming relates to a variety of techniques that are used to allocate limited resources among activities to achieve a specific objective.

The Robinson-Patman Act prohibits companies from pricing products at different levels when there are no significant differences in production costs.

Information that is related to past events is relevant in the decision-making process.

The graphical approach to solving a linear programming problem becomes much more complex when there are more than two

Minimization of contribution margin is a common objective function in linear programming.

Galveston Pipe Corporation The capital budgeting committee of the Galveston Pipe Corporation is evaluating the possibility of replacing its old pipe-bending machine with a more advanced model. Information on the existing machine and the new model follows: Refer to Galveston Pipe Corporation. The $80,000 market value of the existing machine is

In an outsourcing decision, avoidable fixed costs are irrelevant.

Atlanta Motors Atlanta Motors is trying to decide whether it should keep its existing car washing machine or purchase a new one that has technological advantages (which translate into cost savings) over the existing machine. Information on each machine follows: Refer to Atlanta Motors. The $4,000 of annual operating costs that are common to both the old and the new machine are an example of a(n)