Scribd
Upload
860 views3 pages

Week 4

There are three types of business decisions: operational, sales-oriented, and strategic. Operational decisions include replacing equipment, changing prices, and bundling products. Make or buy decisions and fixed costs are usually relevant to operational decisions. Irrelevant information does not differ between alternatives, while sunk costs are those that have already been incurred and cannot be recovered. Contracted salary costs that have not been incurred are not truly sunk costs. Allocated administrative costs that do not change in total if a product is dropped are irrelevant to the decision. Manufacturing inputs in-house requires comparing relevant purchase and production costs. Relevant information for new product decisions includes revenues, purchase costs, and space costs. Variable production and purchase costs are relevant for

Uploaded by

karanjeet singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
860 views3 pages

Week 4

There are three types of business decisions: operational, sales-oriented, and strategic. Operational decisions include replacing equipment, changing prices, and bundling products. Make or buy decisions and fixed costs are usually relevant to operational decisions. Irrelevant information does not differ between alternatives, while sunk costs are those that have already been incurred and cannot be recovered. Contracted salary costs that have not been incurred are not truly sunk costs. Allocated administrative costs that do not change in total if a product is dropped are irrelevant to the decision. Manufacturing inputs in-house requires comparing relevant purchase and production costs. Relevant information for new product decisions includes revenues, purchase costs, and space costs. Variable production and purchase costs are relevant for

Uploaded by

karanjeet singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

True or false?

There is a clear distinction between operational decisions, sales-oriented


decisions, and strategic decisions.
1 point

True

False

2.
Question 2
Which of the following are examples of operational decisions? (Check all that apply.)
1 point

Change the product price

Bundle products

Replace or repair old equipment

Eliminate a product line

3.
Question 3
True or false? Make or buy decisions are usually considered operational decisions.
1 point

True

False

4.
Question 4
True or false? Relevant information includes information that does not differ across decision
alternatives.
1 point

True

False

5.
Question 5
True or false? Sunk costs are costs that differ between decision alternatives.
1 point

True

False

6.
Question 6
Ryan is a manager in a bank. He is using cost information to make a number of operational
decisions. Some of these costs are salaries for other employees, who have formal one-year
employment contracts. Which of the following statements are true regarding these costs? (Check
all that apply.)
1 point
Ryan can classify salary costs as sunk, regardless of whether there is a contract.

Because contracted salary costs have not yet been incurred, they are not actually sunk costs.

Because contracted salary costs are labor-oriented, they will always be relevant to operational
decisions.

Ryan can deem contracted salary costs as irrelevant for most operational decisions.

7.
Question 7
Shelby is considering whether to drop a product line from her business. Some administrative
costs are being allocated to the product line but will not change in total if Shelby decides to drop
the product line. Which of the following statements are true regarding these costs? (Check all
that apply.)
1 point

The allocated administrative costs are irrelevant because they are not direct costs.

Shelby will drop the product line from her business because of administrative cost savings.

Administrative costs are always irrelevant.

The allocated administrative costs may look like cost savings resulting from dropping the product
line but are actually irrelevant.

8.
Question 8
True or false? Fixed costs are always relevant in operational decisions.
1 point

True

False

9.
Question 9
Sal owns a small manufacturing firm. He is deciding whether he should continue to purchase
inputs from existing suppliers or manufacture the inputs in his own firm. Assuming Sal is focused
on a profitability perspective, which of the following statements is true regarding Sal’s decision?
1 point

Sal will base his decision solely on the issue of input quality.

Sal will consider the cost to manufacturing the inputs as irrelevant since he is already purchasing
the inputs from existing suppliers.

Sal will compare the relevant costs associated with purchasing the inputs versus manufacturing
the inputs.

Sal will consider the purchase price as irrelevant since he has the option to manufacture the
inputs in his own firm.

10.
Question 10
Ben owns a sports equipment retail store. He is considering adding various hockey equipment
product lines. Which of the following reflect potentially relevant information in this decision?
(Check all that apply.)
1 point

Revenues earned from the hockey equipment

Existing administrative costs allocated to each product line

Cost to purchase the hockey equipment from the manufacturer

Original cost of floor space in the store already owned that will be used to display the hockey
equipment

11.
Question 11
Jaclyn owns a bakery. Lydia, the owner of the business next door, asks Jaclyn if she could
provide cookies every Friday for her employees for 25% less than the normal price. Which of the
following reflect potentially relevant information in the decision to accept Lydia’s offer? (Check all
that apply.)
1 point

How many cookies Lydia can sell to existing customers

How many cookies Lydia can make

Fixed costs incurred for the ovens used to produce the cookies

Variable costs incurred in the production of the cookies

12.
Question 12
Zach owns a “you-pick” blueberry farm. He owns a variety of young plants that he sells to
customers that visit the farm. The variety of blueberries that Zach sells starts producing berries
when the plant is three years old. Currently, Zach could sell his two-year old plants to customers
in a pot. Alternatively, he could wait one year, and deliver and install the berry-producing plants.

Which of the following information would be irrelevant to Zach’s decision to sell this inventory
now or process further? (Check all that apply.)
1 point

Variable costs incurred during the additional year

Risks of poor weather and plant disease associated with processing the two-year old plants
further

Variable costs incurred during the first two years

Fixed costs associated with land maintenance

You might also like