Exercise 8-37 Model for Making Tactical Decisions Objective 1 The model for making tactical decisions described in the text has six steps. These steps are listed, out of order, below. Required: Put the steps in the correct order, starting with the step that should be taken first. 1. Select the alternative with the greatest overall benefit. 2. Identify the costs and benefits associated with each feasible alternative. 3. Assess qualitative factors. 4. Recognize and define the problem. 5. Identify alternatives as possible solutions to the problem. Exercise 8-39 Make-or-Buy Decision Objective 1, 2 Refer to the information for Arches Manufacturing above. The fixed overhead is an allocated expense; none of it would be eliminated if production of component DA stopped. Required: 1. What are the alternatives facing Arches Manufacturing with respect to production of component DA? 2. List the relevant costs for each alternative. If Arches decides to purchase the component from Canyonlands, by how much will operating income increase or decrease (as compared to making the component in-house)? 3. CONCEPTUAL CONNECTION Which alternative is better? Arches Manufacturing had always made its components in-house. However, Canyonlands Component Works had recently offered to supply one component, DA, at a price of $50 each. Arches uses 100,000 units of component DA each year. The cost per unit of this component is as follows