Exam 11: Decision Making and Relevant Information

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 change in operating profits if the one-time-only special order for 1,000 units is accepted for $180 a unit by Welch?

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?

Outsourcing is risk free to the manufacturer because the supplier now has the responsibility of producing the part.

Which of the following is NOT one of the steps involved in linear programming?

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

Hasselhoff Camera is considering eliminating Model EOS1 from its camera 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 Hasselhoff Camera eliminate Model EOS1 from its product line? Why or why not?

When replacing an old machine with a new machine,the purchase price of the old machine is a relevant cost.

Answer the following question(s)using the information below. Konrade's Engine Company manufactures part TE456 used in several of its engine models.Monthly production costs for 1,000 units are as follows: It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier.Konrade's Engine Company has the option of purchasing the part from an outside supplier at $85 per unit. -If Konrade's Engine Company purchases 1,000 TE456 parts from the outside supplier per month,then its monthly operating income will

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. -Other than price,what other item should Grant's Kitchens consider before accepting this one-time-only special order?

Sunk costs

Throughput contribution is equal to revenues minus direct material and direct labour costs.

A machine has been identified as a bottleneck and the source of the constraint for a manufacturing company that has multiple products and multiple machines.List and describe five ways the company can overcome the bottleneck.

Managers tend to favour the alternative that makes their performance look best.This leads to conflicts between which of the following?

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

Parker and Spitzer 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.The following per unit data apply for sales to regular customers: Parker and Spitzer Manufacturing has excess capacity. Required: a.What is the full cost of the product per unit? b.What is the contribution margin per unit? c.Which costs are relevant for making the decision regarding this one-time-only special order? Why? d.For Parker and Spitzer Manufacturing,what is the minimum acceptable price of this one-time-only special order? e.For this one-time-only special order,should Parker and Spitzer Manufacturing consider a price of 200 per unit? Why or why not?

The opportunity cost of holding significant inventory includes

Local Steel Construction Company produces two products,steel and wood beams.Steel beams have a unit contribution margin of $200,and wood beams have a unit contribution margin of $150.The demand for steel beams exceeds Local Steel Construction Company's production capacity,which is limited by available direct labour and machine-hours.The maximum demand for wood beams is 90 per week.Management desires that the product mix should maximize the weekly contribution toward fixed costs and profits. Direct manufacturing labour is limited to 3,000 hours a week and 1,000 hours is all that the company's outdated machines can run a week.The steel beams require 120 hours of labour and 60 machine-hours.Wood beams require 150 labour hours and 120 machine-hours. Required: Formulate the objective function and constraints necessary to determine the optimal product mix.

Precision Sewing Company incorporates the services of Rosie's Sewing.Precision purchases pre-cut dresses from Rosie's.This is primarily known as

The feedback obtained in the decision process cannot affect

In a manufacturing operation,the bottleneck machine sets the pace for all non-bottleneck machines.