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Decision making criteria, effect of special order, trade in

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Which one of the following is non financial information that management might evaluate in making a decision?
A) opportunity cost of a decision
B) contribution margin
C) the effect on profit of a decision
D) the corporate profile in the community.

For which of the following decision is incremental analysis not appropriate?
A) determining cost behavior
B) an allocation of limited resource decision

It costs fortune company 12 for variable and 5 of fixed costs to produce one bathroom scale which normally sells for 35.00. A foreign wholesaler offers to purchase 1000 scales at 15.00 each. Fortune would incur special shipping costs of 1 per scale if the order were accepted. Fortune has sufficient unused capacity to produce the 1000 scales if the special order is accepted, what will be the effect on net income?
A) 2000 increase
B) 2000 decrease
C) 3000 decrease
D) 15000 increase

What role does a trade in allowance on old equipment play in a decision to retain or replace equipment?
A) it relevant since it increases the cost of the new equipment
B) It is not relevant since it reduces the cost of old equipment
C) it is not relevant to the decision since it does not impact the cost of the new equipment
D) it is relevant since it reduces the cost of the new equipment

Which one of the following is possible if Hollywood video cuts its DVD rental rates by 20%?
A) its fixed costs will decrease
B) its profit will decrease by 20%
C) total costs increase
D) a profit can be earned by increasing the number of videos returned.

Which of the following is a consideration of CVP analysis?
A) the level of activity must remain constant over the relevant range
B) the total fixed costs remain constant over the relevant range
C) total variable cost remain constant over the relevant range
D) cost behavior can change as long as total cost remain the same at all activity levels.

The computation of absorption costing gross profit always involves subtracting
A) all current year fixed manufacturing overhead
B) some but not all current year fixed manufacturing overhead
C) all fixed manufacturing overhead applied to units sold in the current year
D) no fixed manufacturing overhead.

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Solution Preview

Which one of the following is non financial information that management might evaluate in making a decision?
A) opportunity cost of a decision
B) contribution margin
C) the effect on profit of a decision
D) the corporate profile in the community.

The only response that is "non financial" is D - corporate profile. The others are all financial measures of the impact of the decision.

For which of the following decision is incremental analysis not appropriate?
A) determining cost behavior
B) an allocation of limited resource decision

I must be missing two other choices because incremental analysis is appropriate for both of these. If you give me the other two choices, I can update the response solution for you.

It costs fortune company 12 for variable and 5 of fixed costs to ...

Solution Summary

A sentence explains each choice.

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Managerial Decision Making: Example Problems

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1. Discuss your most recent decision to purchase a major item i.e. entertainment center, automobile, home, etc. In what way did the acquisition utility or the transactional utility come into play for you?

2. Explain the availability, representativeness, and affect heuristics. In your answer, compare the three and discuss the positive and negative aspects of each.

3. Lately, the stock market has experienced unprecedented volatility - wild ups and downs. Discuss how stock trading has created a lot of this volatility and the decisions for stock traders to buy and sell wildly in terms of hyperbolic discounting.

4. Bernard Madoff, a once highly regarded member of the Wall Street community, recently pleaded guilty of running a $50 billion ponzi scheme. Research the driving forces behind his seemingly unethical behavior and discuss your findings. How did favoritism and bounded ethicality come into play in this case?

5. Read the case Fairness in Punishment from the link: http://www.solutionlibrary.com/business/management/managerial-decision-making-fairness-in-punishment_7nel. Discuss the Decatur School Board's decision to adopt a "no tolerance on school violence" in terms of fairness. How did implicit attitudes, perhaps, influence the school board's decision to punish such a disproportionate number of African-American students?

6. Recently, the American International Group (AIG), a global insurance and financial services organization, accepted billions of dollars from the United States Government in order to remain solvent and in operation. After receiving this money, the organization decided to pay over $160 million in bonuses. Discuss the ethical problems associated with this decision. Could in-group favoritism play a role in this decision? If you were the CEO, what decision would you have made?

7. Research the subject of the Enron and Arthur Andersen relationship. Discuss your findings in terms of the application of ethics in the various decisions made by the Enron and Arthur Andersen teams. How did bounded ethicality play a role in these decisions?

8. Eventually, the United States and Iran will have to sit down and negotiate the use of nuclear power. Discuss the issues that could be involved in such a negotiation. What cognitive mistakes might be made by the negotiators in this case? How could these mistakes be overcome in order to reach an acceptable agreement?

9. Assume that you are part of a mediation team that has been brought in to help overcome an impasse between negotiators who are deliberating the use of embryonic stem cells for a research project. The decision makers are polarized along ethical and religious lines. Since this is a potentially emotional issue, what would you do in order to break this impasse? How could the fixed pie concept come into play in this situation?

10. Recently, General Motors and the United Auto Workers had to sit down and negotiate a change in the labor agreement, in order to keep the company from going bankrupt. Consider what might have gone on during these negotiations and discuss how framing might have been used, and what issues might have been discussed, in order to reach an acceptable agreement.

11. Research Kurt Lewin's model for change. Then, discuss the three-staged de-biasing process (unfreezing, change, and refreezing) and explain the mechanisms that make each of them hard to implement. In your discussion, include how you believe such a process can help you, personally, to improve your decision-making.

12. Describe the concept of analogical reasoning. Then, considering your last purchase decision, discuss how analogical reasoning could have helped you to improve your decision and increase your satisfaction with the product or service that you purchased.

13. Bazerman and Moore suggest that we should understand the biases of others. Discuss this concept in terms of why it is important for us to understand other peoples' biases. In your discussion, focus on how you might be able to improve your decision-making in a group setting.

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