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- In a strategy meeting, a manufacturing company’s president said, “If we raise the price of our product, the company’s break-even point will be lower.” Thefinancial vice president responded by saying, “Then we should raise our price. The company will be less likely to incur a loss.” Do you agree with the president? Why? Do you agree with the financial vice president? Why?Peterson Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, John Leung, is opposed to the idea of a new JIT system. He is concerned that the new system (a) will be too costly to manage; (b) will result in too many stock outs; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Susan Chow, is in favour of the new system, due to the likely result in cost savings. John wants Susan to revise her cost saving estimation because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…Consider a company faced with a competitor's price reduction. Should the company also reduce price in order to maintain market share or should the company maintain its current price? The company has conducted some preliminary research showing the financial outcomes of each decision under two competitor responses: the competition maintains its price or the competition lowers its price further. The company feels pretty confident that the competitor cannot lower its price further and assigns that outcome a probability (p) of 0.7, which means the other outcome would have only a 30 percent chance of occurring (1-p=0.3). These outcomes are shown in the table below:Competitive ResponseCompany action Maintain Price, p=0.7 Reduce Price, (1-p)=0.3Reduce Price $155,000 $125,000Maintain Price $165,000 $95,000What is the expected value of perfect information (EMV Subscript PI)? Should the research be conducted? Assume that conducting more research costs $15,000.
- Consider a company faced with a competitor's price reduction. Should the company also reduce price in order to maintain market share or should the company maintain its current price? The company has conducted some preliminary research showing the financial outcomes of each decision under two competitor responses: the competition maintains its price or the competition lowers its price further. The company feels pretty confident that the competitor cannot lower its price further and assigns that outcome a probability (p) of 0.8, which means the other outcome would have only a 20 percent chance of occurring (1-p=0.2). These outcomes are shown in the table below:Consider a company faced with a competitor's price reduction. Should the company also reduce price in order to maintain market share or should the company maintain its current price? The company has conducted some preliminary research showing the financial outcomes of each decision under two competitor responses: the competition maintains its price or the competition lowers its price further. The company feels pretty confident that the competitor cannot lower its price further and assigns that outcome a probability (p) of 0.8, which means the other outcome would have only a 20 percent chance of occurring (1-p=0.2). These outcomes are shown in the table below:Competitive ResponseCompany action Maintain Price, p=0.8 Reduce Price, (1-p)=0.2Reduce Price $165,000 $125,000Maintain Price $175,000 $105,000The expected monetary value (EMV) of reducing the price isIn a strategy meeting, the computer manufacturing company's president said, "If we raised the price of our product, the company's break-even point will be lower." The financial vice president responded by saying, "The company will also be less likely to incur a loss." As a management accountant would you agree or disagree with these statements and why?
- Is it easier for a large company to adjust than a small company if market size increases and the retailer does not maintain its budgeted share of the market size? Is this because of the size of the company or the size of the market? Why?Which of the following statements about operating leverage is false? a. Operating leverage measures how operating income will be affected by changes in sales b. The degree of operating leverage is higher for companies with lower fixed costs c. Keeping all factors constant, the higher the contribution margin, the higher the operating leverage. d. All of the given answers are true. e. If the degree of operating leverage higher for a company, this means that the company is more risky than another company with low degree of operating leverage.Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…
- Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…
