Assignment
The steps in management's decision-making process are listed in random order below.
BE7-1 The steps in management's decision-making process are listed in random order below. Indicate the order in which the steps should be executed. ________ Make a decision ________ Review results of the decision ________ Identify the problem and assign ________ Determine and evaluate possible responsibility courses of action
BE7-2 Bogart Company is considering two alternatives. Alternative A will have revenues of $160,000 and costs of $100,000. Alternative B will have revenues of $180,000 and costs of $125,000. Compare Alternative A to Alternative B showing incremental revenues, costs, and net income
E7-1 As a study aid, your classmate Pascal Adams has prepared the following list of statements about decision-making and incremental analysis. 1. The fi rst step in management's decision-making process is, "Determine and evaluate possible courses of action." 2. The final step in management's decision-making process is to actually make the decision. 3. Accounting's contribution to management's decision-making process occurs primarily in evaluating possible courses of action and in reviewing the results. 4. In making business decisions, management ordinarily considers only fi nancial information because it is objectively determined. 5. Decisions involve a choice among alternative courses of action. 6. The process used to identify the fi nancial data that change under alternative courses of action is called incremental analysis. 7. Costs that are the same under all alternative courses of action sometimes affect the decision. 8. When using incremental analysis, some costs will always change under alternative courses of action, but revenues will not. 9. Variable costs will change under alternative courses of action, but fi xed costs will not
E7-2 Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf discs is: Materials $ 10,000 Labor 30,000 Variable overhead 20,000 Fixed overhead 40,000 Total $100,000 Gruden also incurs 5% sales commission ($0.35) on each disc sold.
McGee Corporation offers Gruden $4.80 per disc for 5,000 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. If Gruden accepts the offer, its fi xed overhead will increase from $40,000 to $46,000 due to the purchase of a new imprinting machine. No sales commission will result from the special order.
E7-9 Anna Garden recently opened her own basket weaving studio. She sells finished baskets in addition to the raw materials needed by customers to weave baskets of their own. Anna has put together a variety of raw material kits, each including materials at various stages of completion. Unfortunately, owing to space limitations, Anna is unable to carry all varieties of kits originally assembled and must choose between two basic packages.
The basic introductory kit includes undyed, uncut reeds (with dye included) for weaving one basket. This basic package costs Anna $16 and sells for $30. The second kit, called Stage 2, includes cut reeds that have already been dyed. With this kit the customer need only soak the reeds and weave the basket. Anna is able to produce the second kit by using the basic materials included in the first kit and adding one hour of her own time, which she values at $18 per hour. Because she is more efficient at cutting and dying reeds than her average customer, Anna is able to make two kits of the dyed reeds, in one hour, from one kit of undyed reeds. The Stage 2 kit sells for $36.
Instructions:
Determine whether Anna's basket weaving studio should carry the basic introductory kit with undyed and uncut reeds or the Stage 2 kit with reeds already dyed and cut. Prepare an incremental analysis to support your answer.