Exam 11: Decision Making and Relevant Information

How can conflicts arise between the decision model and the performance evaluation model used to evaluate managers? Provide an example of this type of conflict.

In the decision making of a one-time-only special order, it is assumed that accepting the special order is not expected to affect the selling price to other customers.

Which of the following is true in a decision to keep or replace existing equipment?

Which of the following is not true with regards to relevant costs and relevant revenues?

A relevant cost is a cost that is a(n) ________.

In a make-or-buy decision, which of the following would not be relevant?

Excellent Manufacturers Inc. has a current production level of 20,000 units per month. Unit costs at this level are: Current monthly sales are 18,000 units. Jax Company has contacted Excellent about purchasing 1,550 units at $2.00 each. Current sales would NOT be affected by the one-time-only special order, and variable marketing/distribution costs would NOT be incurred on the special order. What is Ratzlaff Company's change in operating profits if the special order is accepted?

When using the five-step decision process, which one of the following steps should be done last?

To maximize profits, managers should produce more of the product with the greatest contribution margin per unit of the constraining resource.

Performance evaluation focuses on responsibility centers for a specific period, not on projects or individual items of equipment over their useful lives.

In relevant-cost analysis, managers should not consider all variable as relevant and all fixed costs as irrelevant.

Business function costs are the sum of all variable and fixed costs in all business functions of the value chain.

Vien's Fashion Company retains the services of Kennywood Textiles to perform stain control treatments on its women's dresses. This is practice is known as ________.

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 maximum price that Genent's Preserves should be willing to pay for the decorative jars is ________.

Assume you are a sophomore in college and are committed to earning an undergraduate degree. Your current decision is whether to finish college in four consecutive years or take a year off and work for some extra cash. a.Identify at least two revenues or costs that are relevant to making this decision. Explain why each is relevant. b.Identify at least two costs that would be considered sunk costs for this decision. c.Identify at least two opportunity costs for this decision. d.Comment on at least one qualitative consideration for this decision.

Discontinuing unprofitable products will ________.

Cassidy Products Inc.is considering eliminating Model EOS1 from its product line because of losses over the past quarter. The past three months of information for model EOS1 is summarized below: Support costs are 70% variable and the remaining 30% is depreciation of special equipment for model EOS1 that has no resale value. Should Cassidy eliminate Model EOS1 from its product line? Why or why not?

Differential revenue is the difference in total revenue between two alternatives.

Relevant costs are ________.

McMurphy Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 12,000 units of this part are as follows: Of the fixed factory overhead costs, $55,000 is avoidable. Conners Company has offered to sell 12,000 units of the same part to McMurphy Corporation for $41 per unit. Assuming there is no other use for the facilities, Schmidt should ________.