1. LO 10.1________ are the costs associated with not choosing the other alternative. 2. LO 10.1Which type of incurred costs are not relevant in decision-making (i.e., they have no bearing on future events) and should be excluded in decision-making?
3. LO 10.1The managerial decision-making process has which of the following as its third step?
4. LO 10.1Which of the following is not one of the five steps in the decision-making process?
5. LO 10.2Which of the following is sometimes referred to as the “Anti Chain Store Act”?
6. LO 10.2Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000 shelves for $32 each. Cutrate Furniture approached Jansen about buying 1,200 shelves for bookcases it is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen usually packages shelves for Home Depot at a price of $1.50 per shelf. The $1.50 per-shelf cost is included in the unit variable cost of $27, with annual fixed costs of $320,000. However, the $1.50 packaging cost will not apply in this case. The fixed costs will be unaffected by the special order and the company has the capacity to accept the order. Based on this information, what would be the profit if Jansen accepts the special order?
7. LO 10.3________ is the act of using another company to provide goods or services that your company requires.
8. LO 10.3Which of the following is a disadvantage of outsourcing?
9. LO 10.3Which of the following is not a qualitative decision that should be considered in an outsourcing decision?
10. LO 10.4Which of the following is one of the two approaches used to analyze data in the decision to keep or discontinue a segment?
11. LO 10.4When should a segment be dropped?
12. LO 10.4Youngstown Construction plans to discontinue its roofing segment. Last year, this segment generated a contribution margin of $65,000 and incurred $70,000 in fixed costs. Discontinuing the segment will allow the company to avoid half of the fixed costs. What effect is expected to occur to the company’s overall profit?
13. LO 10.5Mallory’s Video Supply has changed its focus tremendously and as a result has dropped the selling price of DVD players from $45 to $38. Some units in the work-in-process inventory have costs of $30 per unit associated with them, but Mallory can only sell these units in their current state for $22 each. Otherwise, it will cost Mallory $11 per unit to rework these units so that they can be sold for $38 each. How much is the financial impact if the units are processed further?
14. LO 10.6A company produces two products, E and F, in batches of 100 units. The production and cost data are:
The company can only perform 12,000 set-ups each period yet there is unlimited demand for each product. What is the differential profit from producing product E instead of product F for the year?
15. LO 10.6When operating in a constrained environment, which products should be produced?
Which of the following costs should not be considered in decision making?Opportunity costs should be ignored when evaluating decision alternatives.
What type of cost is never relevant and should be disregarded when making decisions?Irrelevant costs are those that will not change in the future when you make one decision versus another. Examples of irrelevant costs are sunk costs, committed costs, or overheads as these cannot be avoided.
Which of the following cost should be considered for decision making?variable costs. Variable costs are relevant for decision making as they change when a decision is made.
Which of the following costs should be used when choosing between two decision alternatives?The correct answer is B.
When deciding among alternatives, businesses should consider relevant costs. Relevant costs include variable costs and the avoidable portion of the fixed costs. Sunk costs are costs already incurred in the past and will not affect the current decisions.
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