We looked at short-term decision making. These decisions involve both qualitative and quantitative issues. In this part of the assignment we will look at the qualitative issues involved in the short term decisions we studied. Qualitative considerations for each decision are presented in our text. Students should use their own words to explain these issues. Answers to numbers 1-4 are worth 6 points each for a total of 24 points.

1. Special Orders. We know that if the incremental revenues exceed the incremental expenses of a special order, the order should be accepted. This is quantitative analysis. List three qualitative issues that should be considered before accepting a special order.

A.

B.

C.

2. Make or Buy? We know that if the differential costs of buying from the outside supplier are less than the different costs of making the part, we should outsource. This is quantitative analysis. List three qualitative issues that should be considered before outsourcing.

A.

B.

C.

3. Dropping Unprofitable Segments. We would decide to drop a segment is the direct cost savings is greater than the lost revenue from dropping the segment. List three qualitative issues that should be considered before dropping a segment.

A.

B.

C.

4. Constrained Resource. For this decision we want to maximize the contribution margin per unit of scarce resource. When might we decide to make one product over another even if it were not the most profitable given the resources we have available? List three qualitative issues that should be considered before using up a constrained resource.

A.

B.

C.

5. Identify a real business and give an example of each of the business decisions we have learned. Use at least one complete sentence to describe your decision. There are four decisions, each is worth 6 points for total of 24 points. Do not use the bike example from our text.

My illustration:

A. Special Order-

Company: Procter and Gamble, makers of Tide detergent

Decision: P&G has to decide whether it will use its excess capacity to produce a generic brand laundry detergent for Aldi supermarkets at a lower price that it normally charges.

Use this format and add lines as needed:

A. Special Order

Company:

Decision:

B. Make or Buy?

Company:

Decision:

C. Dropping Unprofitable Segments

Company:

Decision:

D. Constrained Resource

Company:

Decision: