Indicate whether the following statements are true or false Increasing the numbe
ID: 2429529 • Letter: I
Question
Indicate whether the following statements are true or false
Increasing the number of units in a batch increases batch-level costs
Eliminating a business segment often allows a company to avoid some facility-level costs
To analyze a special order decision, a manager should identify differential costs and revenues.
Reliability of the supplier is a critical issue in an outsourcing decision.
Availability of idle capacity is often relevant to special order decisions
When making decisions in business, information that cannot be quantified (expressed in numbers) generally is not relevant
Alternative uses for facilities should be considered in making a special order decision
The purchase price of a old machine is relevant to the decision of whether or not to replace an old machine
-Increasing the number of units in a batch increases batch-level costs
-Eliminating a business segment often allows a company to avoid some facility-level costs
-To analyze a special order decision, a manager should identify differential costs and revenues.
-Reliability of the supplier is a critical issue in an outsourcing decision.
-Availability of idle capacity is often relevant to special order decisions
-When making decisions in business, information that cannot be quantified (expressed in numbers) generally is not relevant
-Alternative uses for facilities should be considered in making a special order decision
-The purchase price of a old machine is relevant to the decision of whether or not to replace an old machine
Explanation / Answer
1 False - Batch level costs are those costs which are incurred once for each batch, regardless of the size of the batch such as setup costs. 2 True - Facility level cost are costs to support general business operation. 3 True - Differential costs and revenues are used to take decision regarding special orders. 4 True - If the outsourcing decision is for a product critical for general business operation, then reliability of supplier is critical. 5 True - Special orders are one time order made by a customer. To fulfil these orders you should have available idle capacity or you have to disturb the normal production, which will cost more. 6 False - Sometime for qualitative decisions in business, information that cannot be quantified is relevant. 7 True - For making decision regarding special order, differencial costs and revenues are compared for alternative uses for facilities 8 False.