Multiple choices (show hand calculate) - LAMA Creations creates sweaters using t
ID: 423570 • Letter: M
Question
Multiple choices (show hand calculate)
- LAMA Creations creates sweaters using the wool of the Llama. The wool used in the manufacturing process is ordered by the bundle. LAMA requires 1,200 bundles of Llama wool per year and places orders of 100 bundles at a time. The cost of ordering is $80.00 per order and the carrying cost per bundle is $3.50. What are LAMA Creations’ ordering costs?
a) $350.00
b) $480.00
c) $960.00
d) $1,060.00
- Animal Treats Company has 500 kg of liver-flavoured dog biscuits that are not selling well. The selling price of the biscuits could be reduced from $3.10 to $2.65 per kg. Or, they could be cheese-coated and sold for $4.25 per kg; the additional processing cost would be $0.40 per kg. Cheese-coated biscuits sell very well. Which alternative probably has less uncertainty
concerning volume of sales?
a) Reduce the price of liver-flavored biscuits
b) Proceed with the cheese coating
c) Both alternatives are uncertain
d) Uncertainty does not affect this decision
- How does the use of sophisticated information systems affect managerial decision-making?
a) Sophisticated information systems always improve managerial decision-making
b) Sophisticated information systems always provide better information
c) Managers may rely more on information reports than on their own biases
d) The cost of sophisticated information systems may exceed their benefit
- Which of the following statements about performance evaluation is true?
a) Nonfinancial measures are less useful than financial measures because they are not as objective
b) Financial measures are less useful than nonfinancial measures because they are biased
c) A combination of financial and nonfinancial measures gives a more useful picture of organizational performance than either one alone
d) Only one or two nonfinancial performance measures should be used
- Bava Company wants to develop a cost function for its maintenance costs to estimate such
costs for the coming year. The following data are available:
Month
Direct Labour Hours
Maintenance Costs Incurred
June
4,000
$ 900
July
6,500
$ 1,325
August
7,000
$ 1,500
September
5,500
$ 1,150
a) $1.00
b) $0.10
c) $0.20
d) $1.50
Month
Direct Labour Hours
Maintenance Costs Incurred
June
4,000
$ 900
July
6,500
$ 1,325
August
7,000
$ 1,500
September
5,500
$ 1,150
Explanation / Answer
1. LAMA Creations
Bundles of Llama wool required per year = 1200
Order placement at a time = 100
Therefore, number of orders required = 1200 / 100 =12
Since, the cost of ordering per order = $80.00
Hence, LAMA Creations’ ordering costs = 12*($80.00) = $960.00 (Option c)
2. It is nowhere mentioned in the question that reducing the cost would increase the sale of the biscuits as this kind of biscuit is not selling well. There is surely an uncertainty for selling this kind of biscuits considering the huge volume available.
Also, it is written that the cheese coated biscuits sell very well but the actual price is not mentioned (i.e. the selling price). It’s only written that it could be sold at $4.25 per kg (it can logically be deduced that if we add additional $0.40 to $3.10 we get $3.50 which is less than what is given in the question i.e. $4.25). Hence, we cannot judge if this price of $4.25 for selling of this cheese-coated biscuits is correct. Hence, there is surely an uncertainty for selling this kind of biscuits considering the huge volume available.
Hence, both alternatives are uncertain (Option c)
3. Sophisticated information system provides better information which in turn provides better information to the managers which is better to rely on rather than their own biases. Hence, Managers may rely more on information reports than on their own biases (Option c).
4. A combination of financial and non-financial measures gives a more useful picture of organization performance than either one alone (Option c). The reason being the financial measures are only based on the numbers and not on the human interaction measures in the organization which is a non-financial measure. Both should be combined and observed simultaneously to get more useful insights.
5. The cost function for its maintenance cost for the coming year can be found out by taking the average value for the months of June, July, August and September and then for the costs for the coming year can be made by multiplying this value with the number of direct labour hours.
Hence, the average value for these months = $(900+1325+1500+1150) / (4000+6500+7000+5500) = $0.20
Therefore, Cost function value comes out to be $0.20 (Option c)
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