BUSI 601 Test 3 Review | 105 Questions with 100% Correct Answers | Verified | Latest Update 2024

Cost relevant to a make versus buy decision include variable manufacturing costs as well as - Avoidable fixed costs employee morale and social responsibility represent two examples of - qualitative decision factors Determination of the optimum short-term product mix needs to include an analysis of: - production constraints In deciding whether to drop or keep a product line, all of the following are relevant to the decision EXCEPT - The level of unavoidable fixed costs Lyman Company has the opportunity to increase annual credit sates $100,000 by selling to a new. riskier group of customers. The expenses of collecting credit sales are expected to be 15 percent of credit sales. The company's manufacturing and selling expenses are 70% of sales, and its effective tax rate is 40%. If Lyman should accept this opportunity, the company's after-tax profits would increase by: - 1. Incremental collection fees = 0.15 " increase In annual credit sales = 0.15 " $100,000 = $15,000 2. Expected increase in after-tax profit= expected increase in pre-tax profit x (1 -1). where t =income tax rate= ('increased revenue· increased collection fees· increased manufacturing & selling expenses) x (1- 0.40) = (($100,000- $15,000 - $70,000) x( 0.60] = $9,000 Many firms are finding it is difficult to compete successfully on cost leadership or differentiation alone, and they must, in fact, compete on both: - Price and functionality.