Chapter 10

Question 1

Segmented Income statement order

Answer 1

1. Sales: 100%
2. Variable expenses: divide Variable expenses by Sales and get %
3. Contribution Margin (Sales-VE): Divide contribution margin total by sales to get %

4.Traceable Fixed Expenses: fixed expenses associated with the process of selling or making the product.
divide traceable fixed expenses by sales to get %

5. Office Segment Margin:how much of the traceable and variable expenses are coming out of the sales
6. Common Fixed Expenses Not traceable to offices: like CEO’s salary divide this number by sales to see how much it takes out of sales

Net operating income: Sales-variable costs-traceable fixed expenses-common fixed expenses

Question 2

WHEN a limited resource of something restricts a company to satisfy a demand

Answer 2

managers must decide what product or services to cut back: managers should focus on products with a higher contribution margin of the contrained resource

Question 3

How can er “relax” the contraint?`

Answer 3

Use the contirbution margin per unit of the constrained resource

Question 4

Ways to increase capacity of the bottle neck

Answer 4

working overtime at the bottle neck

subcontracting the processing done at the bottleneck

Investing additionally to improve capacity of the bottle neck

Question 5

how do I calculate the contribution margin per pound to decide what order I should make the products with the limited resources I have

Answer 5

you divide the DIRECT MATERIALS cost by the cost per pound then you will get the DIRECT MATERIAL POINDS PER UNIT AND THEN DIVIDE BY ORIGINAL CONTRIBUTION MARGIN. you will get the contribution margin per point and then you will see that you should accept orders first for the highs contribution margin per pound order.

Question 6

joint costs

Answer 6

costs made when using the raw materials up to the point where the separate products come out.

Question 7

Split off poin

Answer 7

the point where these separate or joint products emerge

Question 8

at the split-off point, the products are reffered to as

Answer 8

intermediate products. they are not finished products because further process could occur.

Question 9

what is t, or characteristics of t

Answer 9

the t-distrubution has a mean of 0
normal distribution
the shape depends on the parameter called degrees of freedom

Question 10

degrees of freedom

Answer 10

related to the sample size, as the sample size goes up the degrees of freedom increase accordingly. the degrees of freedom = SAMPLE SIZE MINUS 1. DF= N-1

Question 11

Hypothesis testing when sigma (standard dev.) is unknown

Answer 11

1. State the null and alternative hypotheses
   determine the level of significance (a) mostly given in class
2. Compute the Test Statistic: t=
3. Determine the Degrees of Freedom (n-1)
4. determine the P-Value based on test statistic (use Applet)
5. Decision rule- Reject the null hypothesis if the p- value is less than a. if not then don’t reject.
   6.state the conclusion

Question 12

z confidence level

Answer 12

sample mean + z* sigma / sqr of sample size

Question 13

Requirements to check for one-sample sigma unknown procedure

Answer 13

1. the sample is a simple random sample

2. either the sample is from a normally distributed population (use QQ plot or if n >30)

Question 14

three characteristics of the Student’s t-distribution

Answer 14

1. Symmetric
2. mean of 0
3. the exact shape depends on the degrees of freedom n-1

Question 15

How many degrees of freedom generally does the t-distribution have when it is used for inference for a single mean?

Answer 15

df = n-1

Question 16

t confidence level

Answer 16

sample mean + t* s (std. dev of SAMPLE pop. not total population because that would be signma) / sqr of sample size

Question 17

to determine what products to make or buy, you…

Answer 17

if it is cheaper to buy supplies but you have the equipment that will just sit there and cost you money, then it is better to make the products until you hit breaking point then you would buy the rest and make more profit that way

Question 18

the decision to add or drop a product line should be based on the impact the decions iwll have on

Answer 18

net operating income

Question 19

determining whether to carry out an activity in the value hcain internally or use a supplier is called a

Answer 19

make or buy.

Question 20

activities rangin from development to production to after-sales service are called

Answer 20

value chain

Question 21

which term referest to a company that is involved in more than one activity in the value chain

Answer 21

vertical integration

Question 22

if some products must be cut back because of a constraint, produce the products with the highest

Answer 22

contribution margin per unit of CONSTRAINED RESOURCE

Question 23

if two products are constrained by time, how will you which one to pick over the other?

Answer 23

by taking the unit contribution margin / time to make that unit