Exam 11: Decision Making With a Strategic Emphasis

The Car Lot is a New York car dealership located in a highly visible area along a prominent highway. Fred Barns, owner of The Car Lot, was deciding how much front-row space along the highway to devote to four different car models. Fred had a maximum front-row space of 200 feet to devote to the four car models. He wanted a minimum of twenty feet and a maximum of eighty feet of front-row space for each car model. Appropriate data on the four car models follow: The convertible model's monthly contribution per 10 feet of front-row space is calculated to be:

Based solely on a relevant cost analysis, which of the three products should be manufactured by Walman beyond the split-off point?

The decision to keep or drop products or services involves strategic consideration of all the following except:

In deciding whether to manufacture a part or buy it from an outside vendor, a cost that is irrelevant to this short-run decision is:

The Robinson-Patman Act, administered by the U.S. Federal Trade Commission, addresses pricing that could substantially damage the competition in an industry. This pricing is called:

The contribution per foot of front shelf space per day for Limeade is:

In deciding between alternative choices for a given situation, managers usually employ a five-step process. Which of the following is not a step in the decision-making process?

Maxwell Manufacturing is contemplating the purchase of a new machine to replace a machine that has been in use for seven years. The old machine has a net book value of $50,000 and still has five years of useful life remaining. The old machine has a current market value of $5,000, and would have no market value after five years. The variable operating costs and depreciation expenses (straight-line) are $135,000 per year. The new machine will cost $90,000, has an estimated useful life of five years with zero disposal value after five years, and an annual operating expense of $118,000 (including straight-line depreciation). Considering the five years in total and ignoring the time value of money and income taxes, what is the difference in total relevant decision-making costs if the old machine is replaced?

Fixed costs will often be irrelevant for decision making because they:

Assume that the Violin Division was evaluating whether or not it would accept a special sales order for ten violins at $390 per unit. For this purpose, total relevant cost per unit (given the costs stated above) is:

Joint (common) costs in a joint production process are relevant for determining:

If Regis Company purchases the plugs but does not rent the unused facility, the company would:

What strategic factors/considerations are generally relevant to the special order decision problem (i.e., whether a company should accept a one-time order from a customer with whom the company does not generally do business)?

Value streams are useful in decision-making because:

There is insufficient labor capacity in the plant to meet the combined demand for both products. Both products are produced through the same production departments. The fixed factory overhead rate is $10 per direct labor hour. Required: 1. Calculate the unit contribution margin for each product. 2. Determine which product should be produced in priority, given the labor constraint, and explain why.arter Inc. produces two products, A and

In view of the labor shortage, which of the two products is most profitable, and how much is the contribution margin, per direct labor hour?

In situations when management must decide on accepting or rejecting one-time-only special orders, where there is sufficient idle capacity, which one of the following is not relevant to the decision?

The machine-hour constraint for Harrington's linear program is:

In a joint production process, the allocation of joint (common) costs to the joint products is needed:

Copeland Inc. produces X-547 in a joint manufacturing process. The company is studying whether to sell X-547 at the split-off point or upgrade the product to become Xylene. The following information has been gathered: (1) Selling price per pound of X-547. (2) Variable manufacturing costs of the upgrade process. (3) Avoidable fixed costs of the upgrade process. (4) Selling price per pound of Xylene. (5) Joint manufacturing costs to produce X-547. Which of the items should be reviewed when making the upgrade decision?