Exam 11: Decision Making and Relevant Information

All of the following are examples of quantitative factors except:

Qualitative factors, as well as relevant revenues and relevant costs need to be considered when selecting among alternatives.

Product mix decisions ________.

W.T. Ginsburg Engine Company manufactures part ACT30107 used in several of its engine models. Monthly production costs for 1,090 units are as follows: It is estimated that 6% of the fixed overhead costs assigned to ACT30107 will no longer be incurred if the company purchases ACT30107 from the outside supplier. W.T Ginsburg Engine Company has the option of purchasing the part from an outside supplier at $94.75 per unit. If the company accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred) total ________.

Marketing costs will be an irrelevant cost in the decision making of a one-time-only special order.

Fluty Corporation manufactures a product that has two parts, A and B. It is currently considering two alternative proposals related to these parts. The first proposal is for buying Part A. This would free up some of the plant space for the manufacture of more of Part B and assembly of the final product. The product vice president believes the additional production of the final product can be sold at the current market price. No other changes in manufacturing would be needed. The second proposal is for buying new equipment for the production of Part B. The new equipment requires fewer workers and uses less power to operate. The old equipment has a net disposal value of zero. Required: Tell whether the following items are relevant or irrelevant for each proposal. Treat each proposal independently. a.Total variable manufacturing overhead, Part A b.Total variable manufacturing overhead, Part B c.Cost of old equipment for manufacturing Part B d.Cost of new equipment for manufacturing Part B e.Total variable selling and administrative costs f.Sales revenue of the product g.Total variable costs of assembling final products h.Total direct manufacturing materials, Part A i.Total direct manufacturing materials, Part B j.Total direct manufacturing labor, Part A k.Total direct manufacturing labor, Part B

In linear programming, a constraint is a mathematical inequality or equality that must be satisfied by the variables in a mathematical model.

Hartley's Meat Pies is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van follow: Sunk costs include ________.

When there is a constraining resource, a firm should attempt to maximize sales of the product or service with the greatest contribution margin per unit.

Feedback regarding previous actions may affect ________.

Which of the following is true of historical costs?

Past costs are also called sunk costs because they are unavoidable and cannot be changed no matter what action is taken.

Place the following steps from the five-step decision process in order: A = Obtain information including historical costs B = Evaluate performance to provide feedback C = Make decisions choosing among alternatives D = Make predictions about the future E = Identify the problem and uncertainties

Genent's Preserves currently makes jams and jellies and a variety of decorative jars used for packaging. An outside supplier has offered to supply all of the needed decorative jars. For this make-or-buy decision, a cost analysis revealed the following avoidable unit costs for the decorative jars: The relevant cost per jar is ________.

When evaluating a make-or-buy decision, which of the following needs to be considered?

H.J. Manufacturing produces 10,000 units of a part that is used in their assembly process. The production costs are as follows: H.J. Manufacturing has the option of purchasing these units from an outside supplier at $10.75 per unit. If the part is outsourced, 40% of the fixed costs cannot be immediately converted to other uses. a.Describe avoidable costs. What amount of the part's production costs is avoidable? b.Should H.J. outsource the part? Why or why not? c.What other items should H.J. consider before outsourcing any of the parts it currently manufactures?

A company has three products possible products that it can produce in a machine intensive production process. Capacity is constrained by the number of hours the machines can run during a period and the products are so popular that all units produced will be sold. Here is additional information: Which of the following would be an accurate conclusion based on these facts?

Colonial North Manufacturing, Inc. is considering eliminating one of its product lines. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. What financial effects occur if the product line is discontinued?

Planet Design Services, Inc., is considering replacing a machine. The following data are available: For the decision to keep the old machine, the relevant costs of keeping the old machine is ________.

Crandle Manufacturers Inc. is approached by a potential new customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The company has excess capacity. The following per unit data apply for sales to regular customers: What is the contribution margin per unit?