Exam 11: Decision Making and Relevant Information

Answer the following question(s) using the information below. Grant's Kitchens is approached by Ms. Tammy Wang, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers: Grant's Kitchens has excess capacity. Ms. Wang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit. -For make-or-buy decisions, a supplier's ability to deliver the item on a timely basis is considered a(n)

What should Jim do? What are his savings in the first year?

An example of an outsourcing process is when a computer company purchases keyboards from another company instead of producing the components internally.

Scott is the new manager of the credit card department of a large bank. One of his first changes, directed by the president, was to reorganize the activities of the department. He is reluctant to start the reorganization without including a comprehensive report from accounting about the current costs of operations and possible costs of changes. Required: Explain how the decision process model can assist the manager and discuss the steps in the decision process model that might be taken to ensure an orderly decision process.

Top management faces a persistent challenge to make sure that the performance evaluation model of lower level managers is

Silver Lake Cabinets is approached by Ms. Jenny Zhang, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers: Silver Lake Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit. Required: a. For Silver Lake Cabinets, what is the minimum acceptable price of this one-time-only special order? b. Other than price, what other items should Silver Lake Cabinets consider before accepting this one-time-only special order? c. How would the analysis differ if there was limited capacity?

Answer the following question(s) using the information below. Day Star collected the following information: Day Star can sell 25,000 units per year, at $80 each. The company also has an offer from a subsidiary to rent its plant facilities for $2,000,000. The fixed overhead will be incurred in each alternative, but there will be a savings of $150,000 in the fixed costs under the renting alternative. -What production level is required for Day Star to be indifferent between making or buying the part if $260,000 of fixed costs can be eliminated by buying?

A company is preparing its' budgets for the upcoming year. Current direct materials cost is $150,000 and current direct manufacturing labour is $1,000,000, both of which are expected to increase by 4% next year. Overhead costs for the year just ending are: variable $18,000, and fixed $30,000. The firm expects to achieve a 2% cost reduction in overhead costs by continuous improvement. What is the company's expected cost for the upcoming year, if production is the same number of units as the current year?

A client in another province needs immediate help in solving a personnel training problem in the shipping department. Classify each activity on the basis of its relationship with this consulting engagement. Items may have multiple classifications. Use the following headings: a. Four employees will have to spend three nights in Quebec City, the hotel bill has been negotiated in advance for $1,800. b. All staff members receive $1,000 per diem for travel. c. Current year's amortization of the firm's computer system is $15,000. d. Round-trip transportation for each staff member is $500. e. The firm is also sending the same four staff members to Toronto, for a two week engagement upon their return from this trip. The firm's cost of this trip will be $10,000. f. The firm has a $2,000 maintenance contract on its telecommunication system for the current year. g. If the firm accepts this job, it will have to decline a job in Vancouver that has the potential of providing a net cash inflow of $5,000 after all expenses. h. The firm's variable overhead is $50 per client hour. i. The firm will pay $60 next month for this year's membership in the Canadian Consultants Society for each professional staff member. j. Last year the firm paid $4,000 to make improvements in its 5-year leasehold on its offices.

Answer the following question(s) using the information below. Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Welch Manufacturing has excess capacity. The following per unit data apply for sales to regular customers: -What is the full cost of the product per unit?

Unit cost data can mislead decisions by including irrelevant costs or by

John Hatelak, a sales representative for a manufacturing equipment company, has decided to spend less time traveling. He is going to spend only 172 hours per month with his customers. To do this he will have to give up some of his clients. The following information is from his last full month's sales activities. Required: a. What should be his customer mix in order to maximize his sales commissions? b. What will be his income at the best possible customer mix?

Answer the following question(s) using the information below. Jim's 5-year-old Geo Prizm requires repairs estimated at $3,000 to make it road worthy again. His friend, Julie, suggested that he should buy a 5-year-old used Honda Civic instead for $3,000 cash. Julie estimated the following costs for the two cars: -The cost NOT relevant for this decision is the

The total cost difference between two separate alternatives in a decision making process is considered to be its net relevant cost.

Jansen Industries is considering replacing a machine that is presently used in its production process. The following information is available: Which of the information provided in the table is irrelevant to the replacement decision?

A restaurant is deciding whether it wants to update its image or not. It currently has a cozy appeal with loyal customers. The outdated décor that is still in good condition; menus and carpet need to be replaced. Required: Identify for the restaurant management a. those costs that are relevant to this decision; b. those costs that are not differential; c. and qualitative considerations.

In linear programming, the goals of management are expressed in

Which option should Patrick choose to maximize income assuming there is a 40% probability that 70 units will be sold and a 60% probability that 40 units will be sold?

Which of the following represents a qualitative factor?

Jamboree Manufacturing Ltd. produces two products, steel and wood beams. Steel beams have a unit contribution margin of $400, and wood beams have a unit contribution margin of $300. The demand for steel beams exceeds their production capacity, which is limited by available direct labour and machine hours. The maximum demand for wood beams is 60 per week. Management desires that the product mix should maximize the weekly contribution toward fixed costs and profits. Direct manufacturing labour is limited to 2,700 hours a week and 900 hours is all that the company's outdated machines can run a week. The steel beams require 180 hours of labour and 90 machine hours. Wood beams require 270 labour hours and 60 machine hours. Required: Formulate the linear programming objective function and constraints necessary to determine the optimal product mix.