Question 1:
One difference between non-routine decisions and routine decisions is that
a. The data for making non-routine decisions is often not readily available whereas information for routine decisions is collected regularly.
b. Qualitative factors are unimportant in non-routine decisions whereas they are common in routine decisions.
c. Sunk costs are never an issue in routine decision making.
Question 2:
The Sheldon Co. sells about 100 flags per month and normally charges $50 per flag. Management is considering a special order for 20 flags for a price of $42 per flag. The flags in the special order use the exact same materials, labor, technology, and shipping as flags sold to regular customers. Which conclusion below is appropriate based on a quantitative analysis of this special order?
a. Accept the order if Sheldon has excess capacity capable of making at least 20 additional flags.
b. Reject the order because the selling price 16% less than the normal price.
c. Accept the order if Sheldon's variable cost per flags is less than $42.
d. A & C
Question 3:
The Penny Co. produced high-heel shoes in 2010-2016. Management is considering a proposal to switch to making loafers in 2017. In evaluating the proposal, what is the most appropriate description of the profits in 2017 that could be made if Penny continued to sell high-heels?
a. Fixed cost
b. Sunk cost
c. Opportunity cost
d. A & B
Question 4:
To date in 2016, the Wolowitz Co. has produced and sold 1,000 bathroom fixtures. The company incurred direct material cost of $9,000, direct labor cost of $12,000, and overhead cost of $9,500. The company estimates that $4,500 of the overhead cost is fixed. Just before year end, Wolowitz receives a special order for 10 fixtures, but the customer is a local non-profit and is requesting a lower price. What is the lowest price that Wolowitz can quote the customer without incurring a loss on the special order? Assume that the behavior of Wolowitz's costs will be the same whether Wolowitz produces 1,000 or 1,010 fixtures, and that Wolowitz uses an actual cost system.
a. $29.5
b. $21.0
c. $25.0
d. $20.0
e. $26.0
f. $30.5