LO1 How is relevant information used to make short teren decisions? a) Match the concept (by number) to the correct terminology 1. Relevant information 2. Relevant cost 3. Irrelevant cost 4. Sunk Cost 5. Differential analysis A cost that was incurred in the past and cannot be changed regardless of future actions A cost that is relevant to a particular decision because it is a future cont and differs between alternatives Expected future data that differs among alternatives A cout that was incurred in the past and cannot be changed regardless of future actions A method that looks at how operating income would differ with each decision alternative leaving out irrelevant information b) What are some kinds of short-term business decisions? D) 11 111 LO2 How does pricing affect short-term decisions? a) What are three basic questions managers must answer when setting regular prices for their product or services 1 2 3 b) What makes a company a price-taker? c) What makes a company a price-setter? LO3. Hoe do managers decide which products to produce and sell? a) By dropping the Blue Product, it is expected that revenues will decrease by $30,000. They also determined by dropping the Blue Product that variable costs would decrease by $10,000 Because they would be able to get out the building lease, fixed costs would decrease by $12,000. Should the company drop the Blue Product? If the Blue Product is dropped, net income would go up or down by how much (show your work? Expected decrease in revenue Expected decrease in total variable costs Expected decrease in fixed costs Expected decrease in total costs Expected increase or decrease in operating income b) For ABC Company, machine hours is a constant resource in manufacturing their two chairlines Fill in the following table. Which chair gives the highest contribution margin per machine hour (take all calculations to two decimal places)? Executive chair Premium chair 10 12 Machine hours to produce one chair Chairs produced per hour Contribution margin per chair Contribution margin per machine hour 150,00 180.00 LO4. How do managers make outsourcing and processing further decisions? 2 a) What is outsourcing and why might a company outsource? b) What should a company consider when deciding if they should outsource a product or service? c) What should a company consider when deciding if they should sell as is, or process the product further