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Exam 4: Relevant Information for Decision Making

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Question 1

Multiple Choice

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How are constrained resources and relevant ranges related?

A) Resources are usually constrained within their relevant ranges
B) If production is beyond the capacity limit, resources are probably constrained, and production is outside of the relevant range
C) When constrained resources are relaxed or elevated, the relevant range does not change
D) There is no relation between constrained resources and relevant ranges.

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Question 2

Multiple Choice

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Amsat Company has equipment that is in high demand, but has a limited amount of time available. The equipment can be used to produce a number of different products. The following data are available: $\begin{array}{llll}&&\text { Unit Variable }&\text {Units }\\\text { Product } & \text { Unit Price } & \text { cost } & \text { per Hour }\\\mathrm{L} & \$ 400 & \$ 200 & 8 \\\mathrm{M} & 300 & 150 & 22 \\\mathrm{~N} & 600 & 250 & 8 \\\mathrm{O} & 200 & 100 & 20\end{array}$ Which product should be emphasized first?

A) L
B) M
C) N
D) O

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B

Question 3

Multiple Choice

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Duncan Co. sells product P at a price of $38 a unit. The per-unit cost data are: direct materials $8, direct labour $10, and overhead $12 (25% fixed and 75% variable) . Wolff has sufficient capacity to accept a special order for 40,000 units just received. Selling costs associated with this order would be $3 per unit. The minimum selling price per unit should be:

Because many management decisions are unique, managers address them using a(n) :

The Wasson Widget Co. has 1,000 obsolete widgets on hand. These units were produced a year ago at a cost of $10,000. The units could be scrapped for $1,000 or reworked for $2,000 and sold for $5,000. Which alternative is desirable and why?

A constraint is:

A cost that has been incurred in the past and cannot be changed is a (an) :

Mr. Bigletter is employed at an annual salary of $25,000. He plans to start his own business and estimates that he can gross $30,000 annually. If he chooses to open the new business, his foregone salary is a (an) :

Yvonne and Ken own and operate Deluxe House Cleaning Service. Which of the following is a qualitative factor associated with dropping carpet cleaning from their current line of services?

PQK Corporation produces and sells bookends. Its managers are considering whether to outsource the task of cutting the wood for the bookends to DLN Corporation. Which of the following is most likely to be a qualitative factor that managers will consider in making the decision?

In deciding whether to manufacture a part or buy it from an outside supplier, which of the following is an irrelevant cost?

Duncan Co. sells product P at a price of $38 a unit. The per-unit cost data are: direct materials $8, direct labour $10, and overhead $12 (25% fixed and 75% variable) . Wolff has sufficient capacity to accept a special order for 40,000 units just received. Selling costs associated with this order would be $3 per unit. At a selling price of $33 per unit, the operating income will:

For which of the following decisions is vendor reliability a major uncertainty?

Nonroutine operating decisions rarely require analysis of qualitative factors.

Qualitative factors can be difficult to identify because:

One way to deal with constrained resources is to spend money to alleviate them.

A product emphasis decision may involve:

Why are qualitative factors often difficult to identify?

A manufacturer operating with excess capacity has been asked to fill a special order at $7.25 per unit. No other use of the currently idle capacity can be found. The manufacturer's usual variable costs per unit are $3.50 for direct materials, $1.50 for direct labour, $1.50 for variable overhead, and $0.50 for sales commission. No sales commission would be paid on this special order. The average overhead per unit is $0.25. Under the general decision rule, the minimum price per unit for this special order is:

Tieton Co. has two departments: Fabrication and Assembly. They produce 2 products. Product T needs 6 hours in fabrication and 6 hours in assembly. Product S needs 2 hours in fabrication and 4 hours in assembly. Fabrication has 24 hours available and Assembly 18. Total variable costs are $20 and $15 for T and S respectively. T sells for $22 and S for $16. The objective function to maximize Tieton's profits is: