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Various General Decision Rules Are Used for Different Kinds of Nonroutine

Question 164

Matching

Various general decision rules are used for different kinds of nonroutine operating decisions. The types of nonroutine operating decisions and decision rules are listed below. Match each decision rule with the appropriate decision type. Each numbered item has only one correct answer. Each lettered item may be used once, more than once, or not at all.

Premises:
Drop if the contribution margin is less than the sum of relevant fixed costs and opportunity costs
When operating with resource constraints, emphasize the product with the highest overall profit margin
When resources are constrained, sell as much as possible of the product with the highest price
If resources are constrained, emphasize the product with the highest contribution margin per unit of the constrained resource
Emphasize the product with the highest contribution margin per unit if resources are not constrained
Accept if price is greater than or equal to the sum of variable costs, relevant fixed costs and opportunity costs
If the price is greater than or equal to the sum of variable costs and opportunity costs, accept the order
Outsource if the cost to buy is greater than or equal to the sum of variable costs and relevant fixed costs, less opportunity costs
Make the product if the cost to buy is greater than or equal to the difference between variable costs and opportunity costs
Keep work inside if the cost to buy is less than or equal to the sum of variable costs and relevant fixed costs
Responses:
Product emphasis
Insource or outsource
None of the above
Keep or drop business segment
Special order

Correct Answer:

Drop if the contribution margin is less than the sum of relevant fixed costs and opportunity costs
When operating with resource constraints, emphasize the product with the highest overall profit margin
When resources are constrained, sell as much as possible of the product with the highest price
If resources are constrained, emphasize the product with the highest contribution margin per unit of the constrained resource
Emphasize the product with the highest contribution margin per unit if resources are not constrained
Accept if price is greater than or equal to the sum of variable costs, relevant fixed costs and opportunity costs
If the price is greater than or equal to the sum of variable costs and opportunity costs, accept the order
Outsource if the cost to buy is greater than or equal to the sum of variable costs and relevant fixed costs, less opportunity costs
Make the product if the cost to buy is greater than or equal to the difference between variable costs and opportunity costs
Keep work inside if the cost to buy is less than or equal to the sum of variable costs and relevant fixed costs
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