Exam 11: Decision Making and Relevant Information

Product mix decisions ________.

Producing on schedule,quality of supplier products or services,reliability,along with costs are all important considerations when____

Which of the following is an assumption of linear programming?

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

When deciding to lease a new cutting machine or continue using the old machine,the irrelevant cost is ________.

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

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 labor 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 Direct manufacturing labor is limited to 3,000 hours a week and 1,000 hours is all that the company's outdated machines can run a week.The steel beams require 120 hours of labor and 60 machine-hours.Wood beams require 150 labor hours and 120 machine-hours. Required: Formulate the objective function and constraints necessary to determine the optimal product mix.

In relevant-cost analysis,managers should not consider all variable as relevant and all fixed costs as irrelevant.

W.T.Ginsburg Engine Company manufactures part ACT30107 used in several of its engine models.Monthly production costs for 1,090 units are as follows: Direct materials \ 46,000 Direct labor 10,500 Variable overhead costs 32,500 Fixed overhead costs Total costs \ 1111,000 It is estimated that 6% of the fixed overhead costs assigned to ACT30107 will no longer be incurred if the company purchases ACT30107 from the outside supplier.W.T Ginsburg Engine Company has the option of purchasing the part from an outside supplier at $94.75 per unit. If the company accepts the offer from the outside supplier,the monthly avoidable costs (costs that will no longer be incurred)total ________.

When there is an excess capacity,it makes sense to accept a one-time-only special order for less than the current selling price if ________.

Which of the following would be a consideration in a make-or-buy decision?

For short-run product-mix decisions,maximizing contribution margin will also result in maximizing operating income.

Factors used to decide whether to outsource a part include ________.

Planet Design Services,Inc. ,is considering replacing a machine.The following data are available: The difference between keeping the old machine and replacing the old machine is ________.

W.T.Ginsburg Engine Company manufactures part ACT31107 used in several of its engine models.Monthly production costs for 1,000 units are as follows: Direct materials \ 42,000 Direct labor 10,500 Variable overhead costs 32,500 Fixed overhead costs Total costs \ 1103,000 It is estimated that 6% of the fixed overhead costs assigned to ACT31107 will no longer be incurred if the company purchases ACT31107 from the outside supplier.W.T.Ginsburg Engine Company has the option of purchasing the part from an outside supplier at $94.75 per unit. If W.T.Ginsburg Engine Company purchases 1,000 ACT31107 parts from the outside supplier per month,then its monthly operating income will ________.(Round any intermediary calculations and your final answer to the nearest cent. )

Crandle Manufacturers Inc.is approached by a potential customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers.The company has excess capacity.The following per unit data apply for sales to regular customers: What is the full cost of the product per unit?

Which of the following is not true with regards to relevant costs and relevant revenues?

A mathematical inequality or equality that must be appeased is known as a(n)________.

If Option 1 costs $120 and Option 2 costs $90,then the differential cost is $30.

Assume you are a sophomore in college and are committed to earning an undergraduate degree.Your current decision is whether to finish college in four consecutive years or take a year off and work for some extra cash. a.Identify at least two revenues or costs that are relevant to making this decision.Explain why each is relevant. b.Identify at least two costs that would be considered sunk costs for this decision. c.Identify at least two opportunity costs for this decision. d.Comment on at least one qualitative consideration for this decision.