ch8 guidlines

Question 1

relevant short-term special business decision

Answer 1

1. pertains to the future

2. differs between alternatives

Question 2

two key guidelines in making short-term special business decisions

Answer 2

1. focus on relevant data

2. use a contribution margin approach that separates variable costs from fixed costs

Question 3

a companies commitment to sustainability affects decision making

Answer 3

they judge every decision through the lens of the triple bottom line, assessing the impact of the decision not only on company profit, but also on its consequences for people and the planet

Question 4

what to consider in setting regular product prices

Answer 4

1. what profit stockholders expect
2. what price customers will pay
3. whether it is a price-setter or a price-takers

Question 5

discontinue product line

Answer 5

if the cost savings exceed the lost revenues from dropping the electronics product line, then dropping will increase operating income

Question 6

with limited space what product should be sold

Answer 6

should focus on selling the products with the highest contribution margin per unit of the constraint

Question 7

outsource its operations

Answer 7

if the incremental costs of operating its own warehouses exceed the costs of outsourcing, then outsourcing will increase operating income

Question 8

how should a company decide whether to sell a product as is or process further

Answer 8

process further only if the extra sales revenue exceeds the extra costs of additional processing