Exam 14: Short-Term Decision Making

Which of the following factories should be closed down?

A bus company is offering cheap fares for special excursions. It has advertised its trips in newspapers and has already paid a quarter of the advertising fee, and has agreed to pay the final installment soon. Which of the following statements is correct?

To complete a contract for fitting out a new shop in time for its opening, a refurbishment company has employed three temporary painters for 10 days at £45 per day and moved two carpenters who are paid £70 per day from another job for three days. The penalty for late completion of the shop is £300 but the delay to the carpenters' current job will only cost £150. What are the relevant costs?

A company produces hand-made greetings cards. If labour is limited, in what order should these cards be produced to maximise the company's profits?

Which definition best describes an opportunity cost?

A company is considering leasing a new photocopier, which would save 20% of printing costs per copy but would increase the annual leasing charge by £400. If they expect to make 200,000 copies per year, what would the cost per copy need to be to make it worth changing?

A company makes different coloured pens but has a limited supply of materials. Using the data below, in what order of priority should the pens be made:

A company is estimating the benefits of investing in a new machine to improve its output. Its current variable costs are £12 per unit and current fixed costs are £48,000. If the new machine increases fixed costs by 20% but reduces variable costs by 10%, at what level of production should they change to the new method?

An outdoor clothing manufacturer has to make decisions about which items to make itself and which to buy-in from third party suppliers. The design costs are a fixed charge, only incurred if the product is made in-house. Which should it buy in?

Which of these are all relevant costs?