Exam 11: Decision Making and Relevant Information

Hartley's Meat Pies is considering replacing its existing delivery van with a new one.The new van can offer considerable savings in operating costs.Information about the existing van and the new van follow: Relevant costs for this decision include ________.

Business function costs are the sum of all variable and fixed costs in all business functions of the value chain.

Kitchens Sales Inc.is approached by Mr.Louis Cifer,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: Kitchens Sales inc.has excess capacity.Mr.Cifer wants the cabinets in cherry rather than oak,so direct material costs will increase by $66 per unit.The average marketing cost of Kitchens Sales product is $173 per order.Other than price,what other items should Kitchens Sales consider before accepting this one-time-only special order?

Hartley's Meat Pies is considering replacing its existing delivery van with a new one.The new van can offer considerable savings in operating costs.Information about the existing van and the new van follow: Sunk costs include ________.

Under what conditions might a manufacturing firm sell a product for less than its long-term price? Why?

Differential revenue is the difference in total revenue between two alternatives.

Which of the following costs always differ among future alternatives?

Fairhaven Company needs 1,000 motors in its manufacture of boats.It can buy the motors from Asian Motors for $1,250 each.Southwestern's plant can manufacture the motors for the following costs per unit: If Southwestern buys the motors from Jinx,70% of the fixed manufacturing overhead applied will not be avoided. Required: a.Should the company make or buy the motors? b.What additional factors should Southwestern consider in deciding whether or NOT to make or buy the motors?

Avoidable variable and fixed costs should be considered relevant when deciding whether to discontinue a product,product line,business segment,or customer.

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 change in operating profits if the one-time-only special order for 1,030 units is accepted for $550 a unit by Crandle?

Qualitative factors are outcomes that can be easily measured in numerical terms,such as the costs of direct labor.

A decision model is an informal method for making a choice,using simpler methods like surveying.

Decisions about whether a producer of goods or services will insource or outsource are also called make-or-buy decisions.

Linear programming is a tool that maximizes total contribution margin of a mix of products with multiple constraints.

Rubium Micro Devices currently manufactures a subassembly for its main product.The costs per unit are as follows: Crayola Technologies Inc.has contacted Rubium with an offer to sell 6,000 of the subassemblies for $144.00 each.Rubium will eliminate $89,000 of fixed overhead if it accepts the proposal.Should Rubium make or buy the subassemblies? What is the difference between the two alternatives?

Which of following is a firm's risk of outsourcing the production of a part?

With a constraining resource,managers should choose the product with the ________.

All of the following are examples of quantitative factors except:

Full costs of a product include variable and fixed costs in a particular business function in the value chain.

Relevant costs are ________.