2. Which technique is based on computing the quantity of goods a company needs to sell to just cover its costs?

Net present value

Break-even analysis

Activity based costing

Internal rate of return

Variable costing

3. What is Raissa's cookie company revenue if she sells 200 chocolate chip cookies at $1.50 each?

$250

$400

$200

$300

$350

4. What is the maximum variable cost per unit a firm to break even with a fixed cost of $400,000.00 if they project they can sell 25,000 units at a selling price of $75.00?

$59

$79

$69

$89

$49

5. Decision trees are

a logic that managers follow to make decisions.

modeling tools used to evaluate highly dependent decisions.

modeling tools used to evaluate independent decisions that must be made in sequence.

trees where managers sit to make decisions.

6. Which of the following information items are contained in decision trees?

Probability of choosing decision alternatives

Indecision points

Deterministic event probabilities

Decision alternatives

7. In a decision tree, what is the weighted average of chance events?

Expected value

Outcomes

Decision points

Decision alternatives

8. Joes Tasty Burger has determined that its production facility has a design capacity of 366 hamburgers per day. The effective capacity, however, is 270 hamburgers per day. Lately Joe has noticed that output has been 239 hamburgers per day. Compute both design and effective capacity utilization measures.

(Round your answers to 0 decimal places, e.g. 25%.)

Utilization _Effective = ------- %

Utilization _Design = ------- %

11. Harrison Hotels is considering adding a spa to its current facility in order to improve its list of amenities. Operating the spa would require a fixed cost of $23,800 a year. Variable cost is estimated at $40 per customer. The hotel wants to break even if 11,900 customers use the spa facility. What should be the price of the spa services? (Round answer to 2 decimal places, e.g. 15.25.)

Price of services

-------- $

12. Gabriela Manufacturing must decide whether to insource or outsource a new toxic-free miracle carpet cleaner that works with its Miracle Carpet Cleaning Machine. If it decides to insource the product, the process would incur $200,000 of annual fixed costs and $1.35 per unit of variable costs. If it is outsourced, a supplier has offered to make it for an annual fixed cost of $100,000 and a variable cost of $2.15 per unit in variable costs.

a. Given these two alternatives, determine the indifference point (where total costs are equal).

Indifference point

-------------- units

b. If the expected demand for the new miracle cleaner is 360,000 units, what would you recommend that Gabriela Manufacturing do?

---------- is a cheaper alternative. OutsourcingInsourcing is a cheaper alternative. The actual difference between the total costs of insourcing and outsourcing may be

computed to be $------------- .

14. The Steiner-Wallace Corporation has determined that it needs to expand in order to accommodate growing demand for its laptop computers. The decision has come down to either expanding now with a large facility, incurring additional costs and taking the risk that the demand will not materialize, or expanding small, knowing that in three years management will need to reconsider the question. Management has estimated the following chances for demand:

• The likelihood of demand being high is 0.67.
• The likelihood of demand being low is 0.33.

Profits for each alternative have been estimated as follows:

• Large expansion has an estimated profitability of either $121,000 or $50,000, depending on whether demand turns out to be high or low.
• Small expansion has a profitability of $32,000, assuming that demand is low.
• Small expansion with an occurrence of high demand would require considering whether to expand further. If the company expands at that point, the profitability is expected to be $67,000. If it does not expand further, the profitability is expected to be $41,000.

(b) Calculate the expected values for large and small expansions and decide what Steiner-Wallace should do.

EV _{small expansion} = $ -------------

EV _{large expansion} = $ -------------

Company sould opt -------------- expansion.