Exam 11: Decision Making With a Strategic Emphasis

A boat, costing $108,000 and uninsured, was wrecked the very first day it was used. This boat can either be disposed for $11,000 cash and be replaced with a similar boat costing $110,000, or rebuilt for $98,000 and be brand new as far as operating characteristics and looks are concerned. A relevant cost analysis of the decision to replace the boat shows:

Which of the following costs would be relevant in short-term decision making (evaluating "special sales orders," make-vs.-buy decisions, etc.)?

The opportunity cost of making a component part in a factory with no excess capacity is the:

Manders Manufacturing Corporation uses the following model to determine an optimal short-term product mix for its two products, metal (M) and scrap metal (S): Max Z = $30M + $70S Where: 3M + 2S ≤ 15 2M + 4S ≤ 18 The point where M = 2 and S = 3 would:

A decision bias is an inherent tendency that leads to incorrect decisions. An example of a decision bias is failure to:

Which one of the following is most descriptive of a strategic analysis conducted as part of a decision analysis?

Depreciation expense is relevant in a decision only in the context of:

In the situation where a firm produces multiple products and has a single resource constraint (e.g., machine hours), the most profitable use of available capacity (machine hours) requires that we assess:

Variable costs will generally be relevant for decision making because they:

The controller for Warner Mfg.is trying to implement some of the characteristics of a just-in-time (JIT) inventory system.She has accumulated data on Warner's present inventory system and obtained some projections and estimates of what the results of a JIT system would be. The inventory holding cost is $0.75 per unit, per month.Warner currently purchases 120,000 units every four months.Under a JIT system Warner would purchase 30,000 units every month.The monthly inventory schedule and the controller's estimate for a JIT system are provided below: (Assume the above trend continues throughout the year.) Required: Which system should Warner use, and why?

Walman Corp. manufactures products X, Y, and Z from a joint production process. Joint costs are allocated to products based on relative sales value of the products at the split-off point. Additional information is as follows:Product X's sales value at the split-off point is:

Orange Computer Co. is quickly becoming a major player in the personal computer market. The company currently has multiple companies producing products that go into an Orange computer. This practice of having an outside firm provide a function for Orange Computer Co. is called:

Sunk costs are:

The mathematical tool used to determine the optimum short-term product (or service) mix is:

Management accountants are frequently asked to analyze various decision situations including the following: (1) Alternative uses of plant space, to be considered in a make/buy decision. (2) Joint production costs incurred, to be considered in a sell-at-split-off-point-versus-process-further decision. (3) Research and development (R&D) costs incurred in prior months, to be considered in a new-product-introduction decision. (4) The cost of a special device that is necessary if a special sales order is accepted. (5) The cost of obsolete inventory to be considered in a keep-versus-disposal decision. The costs described in situations 1 and 4 above are:

Management accountants are frequently asked to analyze various decision situations including the following: (1) Alternative uses of plant space, to be considered in a make/buy decision. (2) Joint production costs incurred, to be considered in a sell-at-split-off-versus-process-further decision. (3) Research and development (R&D) costs incurred in prior months, to be considered in a product-introduction decision. (4) The cost of a special device that is necessary if a special sales order is accepted. (5) The cost of obsolete inventory to be considered in a keep-versus-disposal decision. The costs described in situations 2, 3, and 5 above are:

The make-or-buy (i.e., sourcing) decision can (most likely) apply to decisions regarding all the following functions or expenditures except: