Exam 9: Decision Making and Relevant Information

Although qualitative factors and quantitative nonfinancial factors cannot measured easily in financial terms,they are important for managers to consider.

Regardless of the specific constraining resource,managers should always focus on maximizing total contribution margin.

Relevant costs are ________.

Do managers use historical data to make informed predictions?

The manager at the Sports Shop sells three types of sport products,small,medium,and large. The manager at the Sports Shop needs to determine if the large product needs to be dropped because it is reporting a loss.Compute the increase or decrease in operating income if the manager drops the large product and does not replace it. If the manager dropped the large product and rented out the space used to house the product for $10,000 per year,what is the increase or decrease in operating income?

The managers at Aberdeen Factory attended a meeting to discuss an existing agenda topic,whether to reorganize its manufacturing labor costs,but they need to determine the historical hourly wage rate of the employees.The manager reported the following historical cost information in 2012: Required: Compute the total past (historical)manufacturing labor costs at the Aberdeen Factory.

Which method is an iterative step-by-step procedure for determining the optimal solution in a LP problem?

The manager at the Farmers Market in Virginia pays $600,000 to process 200,000 pounds of compost and converts it into fertilizer to sell to local farmers.During this process,30,000 pounds of the compost were contaminated,yielding 40,000 pounds of lightweight mulch and 120,000 pounds of heavyweight mulch. The lightweight mulch can be sold at $10 per pound,and the heavyweight mulch can be sold at $5.00 per pound. The 40,000 pounds of lightweight mulch can be processed further to yield 35,000 pounds into hardwood mulch at additional processing costs of $300,000.The hardwood mulch can be sold at $28 per pound. The 120,000 pounds of heavyweight mulch can be further processed to yield 40,000 pounds of redwood mulch at additional processing costs of $280,000.The redwood mulch can be sold at $23 per pound. Should the manager at the Farmer's Market sell the joint products,lightweight mulch and heavyweight mulch,at the splitoff point,or further process them into hardwood mulch and redwood mulch? Show all work.

Many managers consider it unethical to take actions that make their own performance look good when these actions are not in the best interests of the firm.

Custom Tooling Solutions has a production capacity of 3,100 units each month,but current production is only 2,600 units.Total manufacturing costs are $62 per unit and marketing costs are $17 per unit.A client offers to purchase 525 units at $78 per unit for the next five months.Should the manager at Custom Tooling Solutions accept the one-time-only special order if only absorption-costing data is available?

Managers can only find the optimal solution by linear programming,and not through trial and error.

Which of the following is not true about product-mix decisions?

Product-mix decisions usually have only a long-run focus because they typically arise in the context of capacity constraints that can be relaxed in the long run.

The theory of constraints is used to emphasize that the management of bottleneck operations as a key to improve the performance of production operations.

In the graphic approach,the ________ in a maximization problem lies at the corner where the dashed line intersects an extreme point of the area of feasible solutions.

The ________ is the juncture in a joint production process when two or more products become separately identifiable.

The manager at Total One manufacturing reported a plant capacity of 225,000 units per month.Unit costs at capacity were reported as follows: The current sales were reported as $190,000 at $31.00 per unit.The manager at Quality Manufacturing contacted the manager at Total One Manufacturing about the purchase of 2,200 units at $25 per unit.Current sales would not be affected by the one-time-only special order.What is the change in operating profit at Total One Manufacturing if the one-time-only special order is accepted?

What steps can managers take to manage bottlenecks and maximize operations at an organization?

The Stratford Elite Manufacturing Company cuts and sews insulated curtains.The facility has two workstations to permit managers to cut and finish the product.The manager reported that the cutting station must wait to receive fabric because they wait for the cut fabric from the workers at the cutting machine.The manger determined that the finishing workstation is constrained by the speed of production by the workers at the cutting workstation,based on an eight-hour day. To eliminate the bottleneck constraint,the employees at the finishing workstation could begin the cutting process two hours earlier each day,compared to the workers at the cutting workstation,because they each complete their work at the same time.The manager realized that this eliminates the bottleneck constraint,but it also increases the amount of finished units produced each day by 175 units.All of the units produced can be sold even though the change resulted in an increase in the inventory stock by 25%,up from 425 units. The managerial accountant reported that the cost of operating the cutting department an additional two hours each day is $1,750 and the contribution margin of the finished products are $7 each.The inventory carrying costs are $.50 per unit,per day. Required: Compute the total production per day in units if the workers at the Finishing workstation work an additional two hours each day at Stratford Elite Manufacturing.What is the net change in the contribution margin if the manager at Stratford Elite Manufacturing makes the change?

In which step of the decision-making process do managers improve implementation when they implement employee training and offer better supervision to employees?