n addition to an incremental analysis, qualitative factors should be included in an business situation analysis. 1. A diversified food company is considering the closing of its condiment division. What qualitative factors should be considered before discontinuing a division or product line? 2. An automobile manufacturer has decided to allow outside suppliers to bid on all parts necessary to make its vehicles. What qualitative factors should be considered by management in deciding whether or not to turn over the production of a part to an outside supplier?

n addition to an incremental analysis, qualitative factors should be included in an business situation analysis. 1. A diversified food company is considering the closing of its condiment division. What qualitative factors should be considered before discontinuing a division or product line? 2. An automobile manufacturer has decided to allow outside suppliers to bid on all parts necessary to make its vehicles. What qualitative factors should be considered by management in deciding whether or not to turn over the production of a part to an outside supplier?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 6Q: In The Trouble with Outsourcing, a Schumpeter column in The Economist, there is a statement of...

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Morrisons Plastics Division, a profit center, sells its products to external customers as well as to other internal profit centers. Which one of the following circumstances would justify the Plastics Division selling a product internally to another profit center at a price that is below the market-based transfer price? a. The buying unit has excess capacity. b. The selling unit is operating at full capacity. c. Routine sales commissions and collection costs would be avoided. d. The profit centers managers are evaluated on the basis of unit operating income.
In The Trouble with Outsourcing, a Schumpeter column in The Economist, there is a statement of advice to companies, who outsource products or services: they need to think harder about what is their core business, and what is peripheral. What types of problems do you think they are talking about? In your answer, present at least five (5) problems that companies should consider when outsourcing products or services.
To emphasize that any decision encompasses qualitative, as well as quantitative, factors, answer one or the following questions: 1.A diversified food company is considering the closing of its Condiment Division. What qualitative factors should be considered before discontinuing a division or product line? 2.An automobile manufacturer has decided to allow outside suppliers to bid on all parts necessary to make its vehicles. What qualitative factors should be considered by management in deciding whether or not to turn over the production of a part to an outside supplier? 3.What are the qualitative factors you might consider when determining whether or not to replace your car?
Requirement 1: A diversified food company is considering the closing of its condiment division. What qualitative factors should be considered before discontinuing a division or product line? Requirement 2: An automobile manufacturer has decided to allow outside suppliers to bid on all parts necessary to make its vehicles. What qualitative factors should be considered by management in deciding whether or not to turn over the production of a part to an outside supplier?
Consider the following series of independentsituations in which a firm is about to make a strategic decision.Decisionsa. A running shoe manufacturer is weighing whether to purchase leather from a cheaper supplier in orderto compete with lower priced competitors.b. An office supply store is considering adding a delivery service that its competitors do not have.c. A regional retailer is deciding whether to install self-check-out counters. This technology will reducethe number of check-out clerks required in the store.d. A local florist is considering hiring a horticulture specialist to help customers with gardening questions.1. For each decision, state whether the company is following a cost leadership or a product differentiationstrategy.2. For each decision, discuss what information the managerial accountant can provide about the sourceof competitive advantage for these firms.
A diversified food company is considering the closing of its condiment division. What qualitative factors should be considered before discontinuing a division or product line?
Consider the following series of independentsituations in which a firm is about to make a strategic decision.Decisionsa. Julian Phones is about to decide whether to launch production and sale of a cell phone with standardfeatures.b. Flint Computers is trying to decide whether to produce and sell a new home computer softwarepackage that includes the ability to interface with a thermostat and a refrigerator. There is no suchsoftware currently on the market.c. Maria Cosmetics has been asked to provide a “store brand” facial cream that will be sold at discountretail stores.d. Jansen Computers is considering developing a special line of computers that can be both a tablet anda computer.1. For each decision, state whether the company is following a cost leadership or a product differentiationstrategy.2. For each decision, discuss what information the management accountant can provide about the sourceof competitive advantage for these firms.
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Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions would be risky, but its management believes the divisions have the potential to be extremely profitable under favorable market conditions. The company is currently using its WACC to evaluate new projects for all divisions. If Yatta Net International does not risk-adjust its discount rate for specific projects properly, which of the following is likely to occur over time? Check all that apply. The firm will accept too many relatively risky projects. The firm will become less valuable. The firm will accept too many relatively safe…
Management has determined that in order to upgrade the competitor to Megatronics standards, an additional $375,000 of invested capital would be needed. a. Compute the current ROI of the Northeast Division and the division's ROI if the competitor is acquired. b. If divisional management is being evaluated on the basis of ROI, will the Northeast Division likely pursue acquisition of the competitor? c. Compute the ROI of the competitor as it is now and after the intended upgrade. d. If ROI is used as the basis for evaluation, would Megatronics Corporation likely be infavor of the acquisition of the competitor?e. Calculate the Northeast Division's ROI after acquisition of competitor but before upgrad-ing. f. Assume that Megatronics uses residual income to evaluate performance and desires a 12 percent minimum return on invested capital. Compute the current residual income of the Northeast Division and the division's residual income if the competitor is acquired.g. If divisional management…
Classify the following decisions as being characteristic of strategic planning, tactical planning, managerial control, or operational control. Determining the mix of products to manufacture this year Examining whether the number of defective goods manufactured is within a certain range Expanding a product line overseas Determining the best distribution route Examining whether the cost of raw materials is within a certain range Examining whether personnel development cost is rising Employing more automated manufacturing this year Examining whether the amount of scrap material is acceptable Building a new plant facility Examining whether employees’ attitudes are improving Examining whether production levels are within a predicted range Making purchasing arrangements with a new supplier Increasing production capabilities this year by purchasing a more efficient piece of machinery Closing a plant
2. Which of the following describes decision making at the tactical orfunctional level?a) Senior management will need to make long-term decisions about the future of the whole business. Therefore, strategic decisions will be made about which markets the business is to operate in, whether to bid to take over a competitor, etc.b) These decisions are made in focusing on the medium-term future of the business, say looking at the 12-18-month pricing strategy for a product, deciding what products to stock over the summer months, etc. They tend to be focused on particular business units or departments.c) These decisions focus largely on the day-to-day running of the business and may be made by lower-level managers, say at the branch level. They may concern inventory levels, staffing rotas, etc.d) None of the above