Chapter06 Individual Decision Making

管理学第9版练习题附答案Chapter 6 Decision Making: The Essence of the Manager’s JobTRUE/FALSE QUESTIONSTHE DECISION-MAKING PROCESS1.Problem identification is purely objective.2.The second step in the decision-making process is identifying a problem.3. A decision criterion defines what is relevant in a decision.4.The fourth step of the decision-making process requires the decision maker tolist viable alternatives that could resolve the problem.5.Once the alternatives have been identified, a decision maker must analyze eachone.6.The step in the decision-making process that involves choosing a best alternativeis termed implementation.THE MANAGER AS DECISION MAKER7.Making decisions is with the essence of management.8.Managerial decision making is assumed to be rational.9.One assumption of rationality is that we cannot know all of the alternatives.10.Managers tend to operate under assumptions of bounded rationality.11.Studies of the events leading up to the Challenger space shuttle disaster pointto an escalation of commitment by decision makers.12. Managers regularly use their intuition in decision making.13.Rational analysis and intuitive decision making are complementary.14.Programmed decisions tend to be repetitive and routine.15.Rules and policies are basically the same.16.A policy is an explicit statement that tells a manager what he or she ought orought not to do.17.The solution to nonprogrammed decision making relies on procedures, rules, andpolicies.18.Most managerial decisions in the real world are fully nonprogrammed.19.The ideal situation for making decisions is low risk.20.Risk is the condition in which the decision maker is able to estimate thelikelihood of certain outcomes.21.Risk is a situation in which a decision maker has neither certainty norreasonable probability estimates.22.People who have a low tolerance for ambiguity and are rational in their way ofthinking are said to have a directive style.23.Decision makers with an analytic style have a much lower tolerance for ambiguitythan do directive types.24.Individuals with a conceptual style tend to be very broad in their outlook andwill look at many alternatives.25. Behavioral-style decision makers work well with others.26.Most managers have characteristics of analytic decisionmakers.27.According to the boxed feature, “Managing Workforce Diversity,” diverseemployees tend to make decisions faster than a homogeneous group of employees.28.The anchoring effect describes when decision makers fixate on initial informationas a starting point and then, once set, they fail to adequately adjust for subsequent information.29.The availability bias describes when decision makers try to create meaning out ofrandom events.30. The sunk cost error is when decision makers forget that current choices cannotcorrect the past.DECISION MAKING FOR T ODAY’S WORLD31.Today’s business world revolves around making decisions, usually with completeor adequate information, and under minimal time pressure.32.Managers need to understand cultural differences to make effective decisions intoday’s fast-moving world.33.According to the boxed feature, “Focus on Leadership,” when identifyingproblems, managers might be from a culture that is focused on problem solving, or their culture might be one of situation acceptance.34.According to the boxed feature, “Focus on Leadership,” findings from studies byGeert Hofstede and from GLOBE researchers show that inhigh uncertainty avoidance countries, decision making tends to be based more on intuition than on formal analysis.35.Highly reliable organizations (HROs) are easily tricked by their success.MULTIPLE-CHOICE QUESTIONSFor each of the following choose the answer that most completely answers the question.THE DECISION-MAKING PROCESS36.Decision making is typically described as ________________, which is a view thatis too simplistic.a.deciding what is correctb.putting preferences on paperc.choosing among alternativesd.processing information to completion37.A series of eight steps that begins with identifying a problem and concludes withevaluating the decision’s effectiveness i s the ________________.a.decision-making processb.managerial processc.maximin styled.bounded rationality approach38.________________ is the existence of a discrepancy between an existing and adesired state of affairs.a.An opportunityb. A solutionc. A weaknessd. A problem39.In identifying the problem, a manager _________________./doc/d417811801.html,pares the current state of affairs with where they would like to beb.expects problems to be defined by neon lightsc.looks for discrepancies that can be postponedd.will not act when there is pressure to make a decision40.Which of the following statements is true concerning problem identification?a.Problems are generally obvious.b. A symptom and a problem are basically the same.c.Well-trained managers generally agree on what is considered a problem.d.The problem must be such that it exerts some type of pressure on the managerto act.41. What is the second step in the decision-making process?a.identifying decision criteriab.allocating weights to the criteriac.analyzing alternativesd.identifying a problem42.To determine the _____________, a manager must determine what is relevant orimportant to resolving the problem.a.geocentric behavior neededb.number of allowable alternativesc.weighting of decision criteriad.decision criteria43.What is the third step in the decision-making process?a.allocating weights to the criteriab.analyzing the alternativesd.implementing the alternative44.If all criteria in the decision making are equal, weighting the criteria______________.a.improves decision making when large numbers of criteria are involvedb.is not neededc.produces excellent decisionsd.improves the criteria45.In allocating weights to the decision criteria, which of the following is helpfulto remember?a.All weights must be the same.b.The total of the weights should sum to .c.Every factor criterion considered, regardless of its importance, must receivesome weighting.d.Assign the most important criterion a score, and then assign weights againstthat standard.46.What is the step where a decision maker wants to be creative in coming up withpossible alternative?a.allocating weights to the criteriab.analyzing alternativesc.developing alternativesd.identifying decision criteria47. When analyzing alternatives, what becomes evident?a.the strengths and weaknesses of each alternativec.the list of alternativesd.the problem48.When developing alternatives in the decision-making process, what must a managerdo?a.list alternativesb.evaluate alternativesc.weight alternativesd.implement alternatives49.Selecting an alternative in the decision-making process is accomplished by__________________.a.choosing the alternative with the highest scoreb.choosing the one you like bestc.selecting the alternative that has the lowest priced.selecting the alternative that is the most reliable50.In Step 6 of the decision-making process, each alternative is evaluated byappraising it against the _____________.a.subjective goals of the decision makerb.criteriac.assessed valuesd.implementation strategy51.______________ includes conveying a decision to those affected and getting theircommitment to it.a.Selecting an alternativeb.Evaluating the decision effectivenessc.Implementing the alternativesd.Analyzing alternatives52.Which of the following is important in effectively implementing the chosenalternative in the decision-making process?a.getting upper-management supportb.double-checking your analysis for potential errorsc.allowing those impacted by the outcome to participate in the processd.ignoring criticism concerning your chosen alternative53. The final step in the decision-making process is to _______________.a.pick the criteria for the next decisionb.reevaluate the weightings of the criteria until they indicate the correctoutcomec.evaluate the outcome of the decisiond.reassign the ratings on the criteria to find different outcomes54.Which of the following is important to remember in evaluating the effectivenessof the decision-making process?a.You should ignore criticism concerning the decision-making process.b.You may have to start the whole decision process over.c.You will have to restart the decision-making process if the decision is lessthan 50 percent effective.d.Ninety percent of problems with decision making occur in the implementationstep.THE MANAGER AS DECISION MAKER55.Managers are assumed to be ______________; they make consistent, value-maximizingchoices within specified constraints.a.rationalb.leaders/doc/d417811801.html,anizedd.satisficers56.It is assumed that a perfectly rational decision maker ______________.a.does not follow rational assumptionsb.does not consider value maximizing as an objectivec.offers inconsistent decisionsd.would be objective and logical57.Managers can make rational decisions if _________________.a.the problem is ambiguousb.the goals are unclearc.the alternatives are limitedd.time constraints exist58. Which of the following is not a valid assumption about rationality?a.The problem is clear and unambiguous.b. A single, well-defined goal is to be achieved.c.Preferences are clear.d.Preferences are constantly changing.59.When managers circumvent the rational decision-making model and find ways tosatisfice, they are following the concept of _________________.a.jurisprudenceb.bounded rationalityc.least-squared exemptionsd.self-motivated decisions60.B ecause managers can’t possibly analyze all information on all alternatives,managers ______________, rather than ______________.a.maximize; satisficeb.maximize; minimizec.satisfice; minimized.satisfice; maximize61.The type of decision making in which the solution is considered “good enough”is known as _________________.a.intuitionb.satisfyingc.maximizingd.satisficing62.When a decision maker chooses an alternative under perfect rationality, she______________ her decision, whereas under bounded rationality she chooses a ______________ decision.a.minimizes; satisficingb.satisfices; maximizingc.maximizes; satisficingd.maximizes; minimizing63. An increased commitment to a previous decision despite evidence that it may havebeen wrong is referred to as _______________.a.economies of commitmentb.escalation of commitmentc.dimensional commitmentd.expansion of commitment64.Intuitive decision making is _______________.a.not utilized in organizationsb. a conscious process based on accumulated judgmentc.making decisions based on experience, feelings, and accumulated judgmentd.important in supporting escalation of commitment65.In studying intuitive decision making, researchers have found that__________________.a.managers do not make decisions based on feelings or emotionsb.managers use data from their subconscious mind to help make their decisionsc.rational thinking always works better than intuitived.accumulated experience does not support intuitive decisions66.All of the following are aspects of intuition except __________________.a.experienced-based decisionsb.affect-initiated decisionsc.cognitive-based decisionsd.programmed decisions67._____________ are straightforward, familiar, and easily defined.a.Unstructured problemsb.Structured problemsc.Unique problemsd.Nonprogrammed problems68.Structured problems align well with which type ofdecision making?a.programmedb.satisficingc.intuitiond.gut feeling69. ______________ decision making is relatively simple and tends to rely heavily onprevious solutions.a.Nonprogrammedb.Linearc.Satisficingd.Programmed70.A procedure _______________.a.is an explicit statement detailing exactly how to deal with a decisionb.is a series of interrelated sequential steps to respond to a structuredproblemc.is a set of guidelines that channel a manager’s thinking in dealing with aproblemd.allows a manager to use broad decision-making authority71.A ______________ is an explicit statement that tells a manager what he or she canor cannot do.a.procedureb.policyc.ruled.solution72.A policy ____________.a.typically contains an ambiguous termb.is used frequently when a manager faces a structured problemc.allows little discretion on the part of the managerd.offers strict rules as to how a problem should be solved73.What is a difference between a policy and a rule?a. A policy establishes parameters.b. A rule establishes parameters.c. A policy is more explicit.d. A rule is more ambiguous.74.A ______________ typically contains an ambiguous term that leaves interpretationup to the decision maker.a.systemb.rulec.solutiond.policy75.A business school’s statement that it “strives for productive relationshipswith local org anizations” is an example of a ________________.a.ruleb.policyc.procedure/doc/d417811801.html,mitment76.Unstructured problems _____________.a.are easily solvedb.present familiar circumstancesc.force managers to deal with incomplete or ambiguous informationd.are routine77.Nonprogrammed decisions are best described as ________________.a.recurring, but difficult to makeb.very similar to problems in other areas of the organizationc.requiring more aggressive action on the decision maker’s thought processesd.unique and nonrecurring78.When problems are ______________, managers must rely on ______________ in orderto develop unique solutions.a.structured; nonprogrammed decision makingb.structured; pure intuitionc.unstructured; nonprogrammed decision makingd.unstructured; programmed decision making79.Lower-level managers typically confront what type of decision making?a.uniqueb.nonroutinec.programmedd.nonprogrammed80.Which of the following is likely to make the most programmed decisions?a.the CEO of PepsiCo.b.the vice president of General Motors Cadillac Division.c.the head of the Minute Maid Division at Coca-Cola.d.the manager of the local McDonald’s.81.______________ is a situation in which a manager can make accurate decisionsbecause the outcome of every alternative is known.a.Certaintyb.Riskc.Uncertaintyd.Maximaxe.Maximin82.If an individual knows the price of three similar cars at different dealerships,he or she is operating under what type of decision-making condition?a.riskb.uncertaintyc.certaintyd.factual83.A retail clothing store manager who estimates how much to order for the currentspring season b ased on last spring’s outcomes is operating under what kind of decision-making condition?a.seasonalb.riskc.uncertaintyd.certainty84.______________ is a situation in which a decision maker has neither certainty norreasonable probability estimates available.a.Certaintyb.Riskc.Uncertaintyd.Maximax85.Nonprogrammed decisions are typically made under a condition of ________________.a.certaintyb.low levels of riskc.uncertaintyd.reliability86. A person at a horse racetrack who bets all of his or her money on the odds-basedlong shot to “win” (rather than “place” or “show”) is making what kind of choice?a.maximaxb.maximinc.minimaxd.minimin87.What best describes the psychological orientation of an individual making a“maximax” choice?a.optimistb.realistc.pessimistd.satisficer88.Optimistic managers could be expected to utilize their maximax orientation whenthey _______________.a.maximize the maximum payoffb.maximize the minimum payoffc.minimize the maximum regretd.minimize the minimum regret89.What is the psychological orientation of a decision maker who makes a “maximin”choice?a.optimistb.realistc.pessimistd.satisficer90.Which of the following best describes “maximizing the minimum possible payoff”?a.maximaxb.maximinc.minimaxd.minimin91.A manager who desires t o minimize his or her maximim “regret” will opt for a______________ choice.a.maximaxb.maximinc.minimaxd.minimin92. Decision makers using what decision-making style make fast decisions and focuson the short run?a.directiveb.behavioralc.analyticd.conceptual93.What types are characterized as careful decision makers with the ability to adaptor cope with unique situations?a.directive decision makersb.behavioral decision makersc.analytic decision makersd.conceptual decision makers94.Who are concerned about the achievements of thosearound them and are receptiveto suggestions from others?a.directive decision makersb.behavioral decision makersc.analytic decision makersd.conceptual decision makers95.Many managers use __________ or rules of thumb to simplify their decision making.a.heuristicsb.biasesc.errorsd.habits96.When decision makers tend to think they know more than they do or holdunrealistically positive views of themselves and their performance, they are exhibiting _______________.a.self-serving biasb.the anchoring effectc.immediate gratification biasd.overconfidence bias97.When decision makers seek out information that reaffirms their past choices anddiscount information that contradicts past judgments, they are exhibiting _______________.a.availability biasb.the anchoring effectc.self-serving biasd.confirmation bias98.When decision makers assess the likelihood of an event based on how closely itresembles other events or sets of events, they are using _______________.a.availability biasb.framing biasc.selective perception biasd.representation bias99.What is the tendency for decision makers to falsely believe that they would haveaccurately predicted the outcome of an event once that outcome is actually known?a.the hindsight biasb.the sunk costs errorc.the randomness biasd.the selective perception biasDECISION MAKING FOR TODAY’S WORLD100.According to the boxed feature, “Focus on Leadership,” when _______________, managers might come from a culture that gathers facts or from a culture that is more intuitive in gathering ideas and possibilities.a.developing alternativesb.implementing alternativesc.searching for informationd.identifying problems101.To make effective d ecisions in today’s fast-moving world, managers need to -_______________./doc/d417811801.html,e the five-stage decision-making processb.know when it is time to call it quitsc.ignore cultural differencesd.identify their style of decision making102.What is a characteristic that the experts say an effective decision-making process has?a.It is inconsistent.b.It acknowledges only objective thinking.c.It focuses on all factors—even those that do not seem important.d.It requires only as much information and analysis as is necessary.103. What term is used by Navy aviators to describe a gut feeling that something isn’t right?a.leemersb.the creepsc.uneasinessd.regret104.Managers of highly reliable organizations (HROs) get the input of _______________ and let them make decisions.a.CEOsb.frontline workersc.customersd.suppliers105.When highly reliable organizations (HROs) face complexity, they -_______________.a.try to simplify datab.aim for deeper understanding of the situationc.defer to the expertsd.act, then thinkSCENARIOS AND QUESTIONSFor each of the following choose the answer that most completely answers the question.THE DECISION-MAKING PROCESSDecisions, Decisions (Scenario)Sond ra needed help. Her insurance company’s rapid growth was necessitating making some changes, but what changes? Should they add to the existing information system or should they buy a new system? She was given the responsibility of analyzing the company’s pr esent information system and deciding what the company should do that would give them plenty of room. She was confused and needed help in making the correct decision.106.According to the decision-making process, the first step Sondra should take is to _____________.a.analyze alternative solutionsb.identify decision criteriac.evaluate her decision’s effectivenessd.identify the problem107. According to the decision-making process, the second step Sondra should take is to ____________.a.analyze alternative solutionsb.identify decision criteriac.evaluate her decision’s effectivenessd.allocate weights to the criteria108.Allocating weights to the criteria is the step in the decision-making process that occurs between identifying the decision criteria and ______________.a.developing the alternativesb.selecting alternativesc.implementing the alternatived.identifying the problem109.When Sondra is conveying her decision to those affected and getting their commitment to it, she is performing which stepin the decision-making process?a.analyzing alternative solutionsb.selecting alternativesc.implementing the alternatived.identifying the problem110.The very last step Sondra should take, according to the decision-making process, is to __________.a.analyze alternative solutionsb.select alternativesc.implement the alternatived.evaluate the decision’s effectivenessThe Car (Scenario)Colleen is a student, and her older brother has loaned her an old car. The car is in need of several repairs before she will feel comfortable driving it.111.Colleen needs a vehicle, but she has to decide if the vehicle is worth repairing. She is facing a(n) _____________, a discrepancy between an existing and a desired state of affairs.a.alternativeb.weighted problem setc.problemd.certainty avoidance situation112.In talking with an automotive repair person, Colleen needs to prioritize the repairs. Her first concern is safety of the vehicle. This step in the decision-making process is called __________________.a.weighting the decision criteriab.analyzing of alternativesc.identifying decision criteriad.selecting an alternativeTHE MANAGER AS DECISION MAKERThe Car (Scenario)Colleen is a student, and her older brother has loaned her an old car. The car is in need of several repairs before she will feel comfortable driving it.113.Colleen decides to have all of the problems fixed on the car. She assumes that the repair person has found all the problems and that there will be no problem correcting the imperfections within a specified budget. This is an example of a __________ decision.a.parochialb.irrationalc.ethicald.rational114.Colleen’s brother has a different view of the repairs. He assumes that the repair person is using the best information available, but there may be other unexpected repairs that might surface and that a higher budget might be more reasonable. He is using ______________.a.rational decision makingb.risk avoidancec.bounded rationalityd.Stage 4 decision making115.Colleen’s brother feels the car is worth repairing because he has owned several cars made by the same manufacturer as this car, and he has driven this car for several years. He is using _________ to determine that the car has value despite its need of repair.a.intuitive decision makingb.selective coordination of thought processesc.sunk costsd.return on investmentThe First Job (Scenario)Upon graduation, you search for a job with the university’s job placement center. Although you have studied and prepared to work in an advertising agency, the first job that you are offered is a supervisor in a manufacturing company working the afternoon shift from 3:00 . until 11:00 .116.If you had made a larger search using the Internet and other employment search processes, you might have been able to find more employment opportunities. This would have been a more _________ decision-making process.a.nonprogrammableb.uncertaind.perfectly rational117.Under bounded rationality, you would be expected to search for a job by ________________.a.looking at all the opportunities that can be analyzed in the time availableb.looking at all the opportunities availablec.looking “outside the box” in your searchd.analyzing all the opportunities until you find the perfect job118.If you use a shortened process of searching for a job, it is likely that you ___________ rather than maximized in your decision process.a.minimizedb.rationalizedc.satisficedd.agreed119.During your job search, you depend on __________ decision making by making your decision based on accumulated judgment and experience.a.experientialb.legalc.intuitived.formidableIs the Picture Clear? (Scenario)Sharon was the regional manager of a large cable television company. She faced many problems and decisions daily, such as how to price each market, who to hire, what kind of technology she should purchase, and how she should handle the increasing customer complaints. She needed some help sorting these issues out.120.When a customer calls and requests a refund for a partial month’s usage of cable, the fact that such situations are routine and most likely have a standard response would make the response a ______________ decision.a.standardb.routinec.policyd.programmed121.Sometimes Sharon follows a ______________, a series of interrelated sequential steps for responding to a structured problem.a.rulec.procedured.suggestion122.Sometimes Sharon instructs her local managers to follow ______________ when confronted with problem situations. Theseestablish parameters for the manager making the decision rather than specifically stating what should or should not be done.a.rulesb.proceduresc.policiesd.orders123.Unfortunately, Sharon also faces issues containing information that is ambiguous or incomplete, such as what kind of technology to purchase. These are known as ______________ problems.a.unstructuredb.variablec.randomd.hit-and-missManaging Your Career (Scenario)Michelle has a new job and is learning to perform the tasks assigned to her. Different situations demand different decision-making processes.124.Michelle finds a situation that instructs her in specific, interrelated, sequential steps to respond to a problem. This is referred to as a _____________.a.ruleb.policyc.broad guidelined.procedure125.Michelle finds a company directive that specifically restricts her from taking certain actions. This is a _____________.a.ruleb.policyc.broad guidelined.procedure。

Chapter 5 QuizThis activity contains 40 questions.1.Implementation is merely conveying the decision to those affected. TrueFalse2. __________ is/are necessary to initiate the decision process to eliminate discrepancies; otherwise, the problem can be put off.A. PressureB. CriteriaC. StandardD. WeightE. Alternatives3. A manager chooses among three alternatives for advertising (billboards, radio, and newspapers) based on research indicating success in sales for the three alternatives. This is a decision under:A. conditions of certaintyB. goal orientationC. conditions of uncertaintyD. constant preferencesE. conditions of risk4. A manager has no idea what alternatives are available for new computer support systems and does not know how she can determine this information. This is a decision under:A. constant preferencesB. conditions of uncertaintyC. conditions of certaintyD. conditions of riskE. clear preferences5. A manager who determines that cost, speed, and enlarging capability are relevant to his decision to purchase a new photocopy machine is an example of the _______________ phase of the decision-making process.A. identifying the problemB. identifying decision criteriaC. formulating a problemD. allocating weights to the criteriaE. developing alternatives6. A manager with a degree of tolerance for ambiguity, but who want lots of information and considers many alternatives before deciding, is exhibiting a/an ____ style of decision making.A. analyticB. behaviouralC. problem seekingD. conceptualE. Directive7.A problem is a discrepancy between an existing and desired state of affairs.TrueFalse8. Many organizational situations involve ___________, that are new and unusual.A. satisficing decisionsB. groupthinkC. non-structured problemsD. non-routine decisionsE. non-programmed decisions9. Behavioural style decision makers:A. have a low tolerance for ambiguity, are very rational and efficient in their decision stylesB. want information, tolerate ambiguity, and are careful decision makersC. work well with others, are concerned about the achievement of others, and often use meetings to make decisions while trying to avoid conflictD. take a broad outlook, examine many different alternatives, and focus on the long runE. have a high tolerance for ambiguity and an intuitive way of thinking10. Bill and Bob are brainstorming possible solutions to a staffing problem. They are writing their ideas down without assessing their practicality or ability. Bill and Bob are at what stage in the decision-making process?A. developing alternativesB. setting decision criteriaC. choosing an alternative solutionD. allocating weights to the criteriaE. analyzing alternatives11. Bounded rationality is:A. behaviour that is rational but limited by an individual's ability to process informationB. the withholding by group members of different views in order to appear in agreementC. conveying a decision to those affected and getting their commitment to itD. an explicit statement that tells managers what they ought or ought not to doE. an unconscious process of making decisions12. Decision making is a simple act of choosing among alternatives.TrueFalse13.Decision making is important for only two management functions: planning and leading.TrueFalse14. Decision making is synonymous with managing.TrueFalse15. Decision making is:A. a set of seven stepsB. a comprehensive processC. highly overstated in importance.D. simply choosing among alternativesE. only discussed with reference to individuals16. Decisions that are routine are called:A. standard decisionsB. non-programmed decisionsC. well-structured problemsD. programmed decisionsE. ill-structured problems17. Each alternative in the decision-making process is evaluated by appraising it against the criteria.TrueFalse18.Evaluating the decision may cause managers to return to an earlier step in the decision process.TrueFalse19.Programmed decisions mean that the manager doesn't have to go through an involved decision process.TrueFalse20. Managers must determine what is relevant when making a decision. TrueFalse21. Mary can repair a saw at Quality Production Inc. in two hours while it takes Mike five hours to make repairs. Assuming that both workers are present, the manager will always choose Mary to make repairs to the saws. This is a decision under:A. problem clarityB. conditions of riskC. conditions of certaintyD. conditions of uncertaintyE. no cost constraints22. Most decisions that managers face meet all the tests of rationality. TrueFalse23. Not every decision maker possesses criteria that guide his or her decision.TrueFalse24. One manager's "problem" may be another manager's satisfactory state of affairs.TrueFalse25. One survey in your text revealed that almost __________ of managers emphasized "gut feeling" over cognitive problem solving and decision making.A. one-tenthB. two-thirdsC. halfD. one quarterE. one-third26. People with a low tolerance for ambiguity, but who are logical and efficient have a/an _________ decision-making style:A. analyticB. creativeC. behaviouralD. conceptualE. directive27. Policies, procedures, and rules are developed to help managers deal with:A. bounded rationalityB. non-programmed decisionsC. structured problemsD. satisficingE. groupthink28. Problem identification is a relatively simple and insignificant step in the decision making process.TrueFalse29. Some discrepancies may not be considered problems because there is no pressure to take action to correct the situation.TrueFalse30. The control mechanism in the decision-making process is:A. in the selection of alternativesB. when you evaluate the decision's effectivenessC. at the time of setting criteria weightsD. when you identify the problemE. in the implementation stage of decision making31. The decision-making process is designed for individual decision making rather than group decision making.TrueFalse32. Escalation of commitment describes increasing commitment to a decision in view of evidence it might be _________.A. wrongB. intuitiveC. wiseD. hastyE. correct33. The manager of a retail clothing store just found out that some "name brand" merchandise was brought into the Canada illegally. This is an example of:A. an unstructured problemB. A programmed decisionC. a procedureD. a structured problemE. satisficing34. The question: How many employees should I have report directly to me? is related to the __________ management function.A. motivatingB. organizingC. planningD. leadingE. controlling35. Accepting decisions that are "good enough" isA. analyzingB. acceptingC. evaluatingD. intuitiveE. satisficing36. Allocating weights to criteria is part of the ________ process.A. pay off matrixB. decision makingC. evaluationD. alternative analysisE. regret matrix37. The following are examples of _____________in decision making: overconfidence, selective perception, hindsightA. intuitionB. representationC. heuristicsD. rules of thumbE. biases and error38. When facing a situation of uncertainty, the decision-maker has:A. some certainty, with limited probability estimatesB. little certainty but some probability estimatesC. good certainty, but no probability estimatesD. neither certainty, nor probability estimatesE. A fair amount of certainty, but no probability estimates39. Effective decision makers _____________A. rely on rules of thumbB. are analyticalC. are quick thinkingD. are well likedE. practice the five whys40. Which of the following statements is one of the assumptions of rationality:A. Preferences are constant and inconsistent.B. A single set of well-defined goals is to be achieved.C. Time and cost constraints exist.D. Options are clear.E. The problem is clear and unambiguous.。

亨格瑞管理会计英⽂第15版练习答案06 CHAPTER 6 COVERAGE OF LEARNING OBJECTIVESCHAPTER 6Relevant Information and Decision Making With a Focus on Operational Decisions 6-A1 (20 min) 1. The key to this question is what will happen to the fixed overhead costs ifproduction of the boxes is discontinued. Assume that all $60,000 of fixed costswill continue. Then, Sunshine State will lose $20,000 by purchasing the boxesfrom Weyerhaeuser:Payment to Weyerhaeuser, 80,000 × $2.10 $168,000Costs saved, variable costs 148,000Additional costs $ 20,000 2. Some subjective factors are:Might Weyerhaeuser raise prices if Sunshine State closed down its box-making facilityWill sub-contracting the box production affect the quality of the boxesIs a timely supply of boxes assured, even if the number needed changesDoes Sunshine State sacrifice proprietary information when disclosing the box specifications to Weyerhaeuser3. In this case the fixed costs are relevant. However, it is not the depreciation onthe old equipment that is relevant. It is the cost of the new equipment. Annualcost savings by not producing the boxes now will be:Variable costs $148,000Investment avoided (annualized) 80,000Total saved $228,000 The payment to Weyerhaeuser is $228,000 - $168,000 = $60,000 less than thesavings, so Sunshine State would be $60,000 better off subcontracting theproduction of the boxes.6-A2 (10 min.)1. Contribution margins:Plain = $70 - $55 = $15Professional = $100 - $75 = $25Contribution margin ratios:Plain = $15 ÷ $70 = 21.4%Professional = $25 ÷ $100 = 25%2. Plain Professionala. Units per hour 2 1b. Contribution margin per unit $15 $25Contribution margin per hour $30 $25 Total contribution for 20,000 hours $600,000 $500,000 3. The plain circular saws are the best use of the scarce machine hours. For a givencapacity, the criterion for maximizing profits is to obtain the greatest possiblecontribution to profit for each unit of the limiting or scarce factor. Moreover,fixed costs are irrelevant unless their total is affected by the choice of products.6-A3 (15 min.) Table is in thousands of dollars.1,2. (a) (b) (a)-(b) (c) (a)-(b)-(c)SeparableSales Sales Costs IncrementalBeyond at Incremental Beyond Gain orSplit-Off Split-Off Sales Split-Off (Loss)A 230 54 176 190 (14)B 330 32 298 300 (2)C 175 54 121 100 21 Increase in overall operating income from further processing of A, B, and C 5The incremental analysis indicates that Product C should be processed further, butProducts A and B should be sold at split-off. The overall operating income would be$44,000, as follows:Sales: $54,000 + $32,000 + $175,000 $261,000Joint cost of goods sold $117,000Separable cost of goods sold 100,000 217,000Operating income $ 44,000Compare this with the present operating income of $28,000. That is, $230,000 + $330,000 + $175,000 - ($190,000 + $300,000 + $100,000 + $117,000) = $28,000. Theextra $16,000 of operating income comes from eliminating the $16,000 loss resultingfrom processing Products A and B beyond the split-off point.6-A4 (30-40 min.)Problem 6-60 is an extension of this problem. The two problems make a good combination.1. Operating inflows for each year, old machine:$910,000 - ($810,000 + $60,000) $40,000Operating inflows for each year, new machine:$910,000 - ($810,000 + $22,000*) $78,000* $60,000 - $38,000Cash flow statements (in thousands of dollars):Keep ReplaceThree ThreeYear Years Years Year Years Years1 2 & 3 Together 1 2 & 3 Together Receipts, inflows from operations 40 40 120 78 78 234 Disbursements:Purchase of "old" equipment (90)* -- (90) (90) -- (90) Purchase of "new" equipment:Total costs less proceedsfrom disposal of "old"equipment ($99,000-$15,000) -- -- -- (84) -- (84) Net cash inflow (outflow) (50) 40 30 (96) 78 60* Assumes that the outlay of $90,000 took place on January 2, 2010, or sometime during 2010. Some students will ignore this item, assuming correctly that it is irrelevant to the decision. However, note that a statement for the entire year was requested.The difference for three years taken together is $60,000 - $30,000 = $30,000. Note particularly that the $90,000 book value can be omitted from the comparison. Merely cross out the entire line; although the column totals will be affected, the net difference will still be $30,000.2. Income statements (in thousands of dollars):Keep ReplaceThree ThreeYears Years Year Years Years1, 2 & 3 Together 1 2 & 3 Together Sales 910 2,730 910 910 2,730 Expenses:Other expenses 810 2,430 810 810 2,430 Operating of machine 60 180 22 22 66 Depreciation 30 90* 33 33 99 Total expenses 900 2,700 865 865 2,595 Loss on disposal:Proceeds ("revenue") -- -- (15) -- (15) Book value ("expense") -- -- 90 -- 90* Loss -- -- 75 -- 75 Total charges 900 2,700 940 865 2,670 Net income 10 30 (30) 45 60 * As in part (1), the $90,000 book value can be omitted from the comparison without changing the $30,000 difference. This would mean dropping the depreciation item of $30,000 per year (a cumulative effect of $90,000) under the "keep" alternative, and dropping the book value item of $90,000 in the loss on disposal computation under the "buy" alternative.Difference for three years together, $60,000 - $30,000 = $30,000.Note the motivational factors here. A manager may be reluctant to replacesimply because the large loss on disposal will severely harm the profitperformance in Year 1.3. The net difference for the three years taken together would be unaffected becausethe item is a past cost. You can substitute any number for the original $90,000figure without changing this answer.For example, examine how the results would change in part (1) by inserting $1 million where the $90,000 now appears (in thousands of dollars):Keep: Replace:Three Years Three YearsTogether Together Difference Receipts, inflows from operations 120 234 114 Disbursements:Purchase of old equipment(1,000) (1,000) 0Purchase of new equipment:Gross price (99)Disposal proceeds of "old" 15 -- ( 84) (84) Net cash outflow ( 880) ( 850) 30 In sum, this may be a horrible situation. The manager really blundered. Butkeeping the old equipment will compound the blunder to the cumulative tune of$30,000 over the next three years.4. Diplomatically, Lee should try to convey the following. All of us tend to indulgein the erroneous idea that we can soothe the wounded pride of a bad purchasedecision by using the item instead of replacing it. The fallacy is believing that acurrent or future action can influence the long-run impact of a past outlay. Allpast costs are down the drain. Nothing can change what has already happened.The $90,000 has been spent. Subsequent accounting for the item is irrelevant.The schedules in parts (1) and (2) clearly show that we may completely ignorethe $90,000 original outlay and still have a correct analysis. The important point is that the $90,000 is not an element of difference between alternatives and,therefore, may be safely ignored. The only relevant items are those expectedfuture items that will differ between alternatives.5. The $90,000 purchase of the original equipment, the sales, and the otherexpenses are irrelevant because they are common to both alternatives. Therelevant items are the following (in thousands of dollars):Three YearsTogetherKeep Replace Operating of machine(3 × $60; 3 × $22) $180 $ 66 Incremental cost of new machine:Total cost $99Less proceeds of old machine 15Incremental cost -- 84 Total relevant costs $180 $150 Difference in favor of buying $ 306-B1 (15-20 min.)1. Make BuyTotal Per Unit Total Per Unit Purchase cost €10,000,000€50 Direct material €5,500,000€27.50Direct labor 1,900,000 9.50Factory overhead, variable 1,100,000 5.50Factory overhead, fixedavoided 900,000 4.50Total relevant costs €9,400,000 €47.00 €10,000,000€50 Difference in favor of making € 600,000 € 3.00The numerical difference in favor of making is €600,000 or €3.00 per unit. Therelevant fixed costs are €900,000, not €3,000,000.2. Buy and LeaveMake Capacity Idle Buy and RentRent revenue -- -- € 1,150,000 Obtaining of components €(9,400,000) €(10,000,000)€(10,000,000)Net relevant costs €(9,400,000) €(10,000,000) € (8,850,000) The final column indicates that buying the components and renting the vacatedcapacity will yield the best results in this case. The favorable difference is€9,400,000 - €8,850,000 = €550,000.6-B2 (15 min.)1. If fixed manufacturing cost is applied to products at $1.00 per machine hour, ittakes $.75 ÷ $1.00, or 3/4 of an hour to produce one unit of XY-7. Similarly, ittakes $.25 ÷ $1.00 or 1/4 of an hour to produce BD-4.2. If there are 100,000 hours of capacity:XY-7: 100,000 hours ÷ 3/4 = 133,333 units.BD-4: 100,000 hours ÷ 1/4 = 400,000 units.Total contribution margins show that BD-4 should be produced, generating$200,000 of contribution margin, which is $66,667 more than would be earned by XY-7.Per Unit Units TotalXY-7 $6.00 - ($3.00 + $2.00) = $1.00 133,333 $133,333BD-4 $4.00 - ($1.50 + $2.00) = $ .50 400,000 $200,0006-B3 (15-20 min.)All amounts are in thousands of British pounds.The major lesson is that a product that shows an operating loss based on fully allocated costs may nevertheless be worth keeping. Why? Because it may produce a sufficiently high contribution to profit so that the firm would be better off with it than any other alternative.The emphasis should be on totals:Replace Magic Department WithExisting GeneralOperations Merchandise Electronic Products Sales 6,000 -600 + 250 = 5,650 -600 + 200 = 5,600 Variable expenses 4,090 -390 + 175a= 3,875 -390 + 100 b= 3,800 Contribution margin 1,910 -210 + 75 = 1,775 -210 + 100 = 1,800 Fixed expenses 1,100 -120 + 0 = 980 -120 + 30 = 1,010 Operating income 810 - 90 + 75 = 795 - 90 + 70 = 790 a(100% - 30%) × 250b(100% - 50%) × 200The facts as stated indicate that the magic department should not be closed. First, the total operating income would drop. Second, fewer customers would come to the store, so sales in other departments may be affected adversely.6-B4 (15 min.)1. Sales ($400 + $600 + $100) $1,100Costs:Raw materials $700Processing 100Total 800Profit $ 3002. Sales ($840 + $850 + $170) $1,860Costs:Joint costs $800Frozen dinner costs 440Salisbury steak costs 200Tanning costs 80Total costs 1,520Profit $ 340Although it is more profitable to process all three products further than it is tosell them all at the split-off point, it is important to look at the economic benefit from further processing of each individual product.3. Steaks to frozen dinners:Additional revenue from processing further ($840 - $400) $440Additional cost for processing further 440Increase (decrease) in profit from processing further $ 0 Hamburger to Salisbury steaks:Additional revenue from processing further ($850 - $600) $250Additional cost for processing further 200Increase (decrease) in profit from processing further $ 50 Untanned hide to tanned hide:Additional revenue from processing further ($170 - $100) $ 70Additional cost for processing further 80Increase (decrease) in profit from processing further $ (10) Only the hamburger dictates that it should be processed further, because it is the only product whose additional revenue for processing further exceeds theadditional cost. You are indifferent about processing further steak to frozendinners, as the incremental profit is 0.4. The resulting profit would be $350:Sales ($400 + $850 + $100) $1,350Costs:Joint costs $800Further processing of hamburger 200Total cost 1,000 Profit $ 3506-B5 (15-20 min.)1. Three Years TogetherKeep Replace Difference Cash operating costs $42,000 $27,000 $15,000 Old equipment, book value:Periodic write-off asdepreciation 15,000 -or lump-sum write-off - 15,000* Disposal value -6,000* 6,000 New equipment, acquisition cost 15,000** - 15,000 Total costs $57,000 $51,000 $ 6,000 *In a formal income statement, these two items would be combined as "loss ondisposal" of $15,000 - $6,000 = $9,000.**In a formal income statement, written off as straight-line depreciation of $15,000 ÷3 = $5,000 for each of three years.2. Three Years TogetherKeep Replace Difference Cash operating costs $42,000 $27,000 $15,000 Disposal value of old equipment - -6,000 6,000 New equipment, acquisition cost - 15,000 - 15,000 Total relevant costs $42,000 $36,000 $ 6,000 This tabulation is clearer because it focuses on only those items that affect thedecision.3. Benefits of the replacement alternative* $15,000Deduct initial net cash outlay required* 9,000 Difference in favor of replacement $ 6,000 * 3 × ($14,000 - $9,000)** $15,000 - $6,000Also, the new equipment is likely to be faster, thus saving operator time. The latter is important, but it is not quantified in this problem.6-B6 (10 min.)1. The replacement alternative would be chosen because the county would have$6,000 more cash accumulated in three years.2. The keep alternative would be chosen because the higher overall costs ofphotocopying for the first year would be shown for the replacement alternative(under accrual accounting):First YearKeep Replace Cash operating costs $14,000 $ 9,000 Depreciation expense 5,000 5,000 Loss on disposal 9,000 Total costs $19,000 $23,000 Thus, the performance evaluation model might motivate the manager to make adecision that would be undesirable in the long run.6-1 An opportunity cost does not entail a disbursement of cash at any future time, whereas an outlay cost does entail an additional disbursement sooner or later.6-2 The $800 represents an opportunity cost. It is the amount forgone by rejecting an opportunity. It signifies that the value to the owner of keeping those strangers out of the summer house for that two-week period is at least $800.6-3 Accountants do not ordinarily record opportunity costs in accounting records because those records are traditionally concerned with real transactions rather than possible transactions. It is impossible to record data on all lost opportunities.6-4 A differential cost is any difference in total cost or revenue between two alternatives. A differential cost is an incremental cost when one of the alternatives contains all the costs of the other plus some additional costs. The additional costs are the incremental costs – which are also differential.6-5 No. Incremental cost has a broader meaning. It is the addition to total costs by the adoption of some course of action. Another term, marginal cost, is used by economists to indicate the addition to costs from the manufacture of one additional unit. Of course, marginal cost is indeed the incremental cost of one unit.6-6 The decline in costs would be called differential or incremental savings.6-7 Not necessarily. Qualitative factors can favor either making or buying. Often factors such as product quality and assurance of delivery schedules favor making. However, sometimes establishing long-term relationships with suppliers is an important qualitative factor favoring the purchase of components.6-8 The choice in many cases is not really whether to make or buy. Instead, the choice is how best to use available capacity. 6-9 Yes. The costs that make a difference when a product or department is being deleted are the avoidable costs.6-10 Four examples of scarce factors are: (a) labor hours, (b) money (investment capital), (c) supervisory hours, and (d) computer hours.6-11 Joint products are two or more manufactured products that (1) have relatively significant sales values and (2) are not separately identifiable as individual products until their split-off point. Examples of joint products include chemicals, lumber, flour, and meat.6-12 The split-off point is where the individual products produced in a joint process become separately identifiable. Costs before the split-off point are irrelevant for decisions about the individual products. They affect the decision about whether to undertake the entire production process, but they do not influence decisions about what to do with the individual products.6-13 Yes. Techniques for assigning joint-product costs to individual products are useful only for product costing, not for deciding on further processing after the split-off point. The product must be considered separately at that point apart from its joint cost. The proper basis of the decision on further processing is a comparison of incremental revenue versus incremental expense between the alternatives of selling at the split-off point and processing further.6-14 No. Once inventory has been purchased, the price paid is a sunk cost. It is true that selling at a price less than $5,000 would produce a reported loss. However, a sale at any price above $0 is economically beneficial provided that the only alternative is to scrap the inventory.6-15 No. Sunk costs are irrelevant to the replacement decision.6-16 No. Past costs are not relevant because they cannot be affected by a decision. Although past costs are often indispensable for formulating predictions, past costs themselves are not the predictions that are the inputs to decision models. Clear thinking is enhanced by these distinctions.6-17 Only b and c are relevant.a. Book value of old equipment is irrelevant to a replacement decision because itdoes not change under any alternative and cannot be realized.b. Disposal value of old equipment is relevant to a replacement decision because itcan either be realized (by replacement) or forgone (by continued use).c. Cost of new equipment is relevant to a replacement decision because it can beincurred (by replacement) or avoided (by continued use).6-18 Yes. Some expected future costs may be irrelevant because they will be the same under all feasible alternatives.6-19 Yes. The statement is correct in terms of total variable costs.6-20 Two reasons why unit costs should be analyzed with care in decision making are: 1. Most unit costs are stable only over a certain range of output, and care must betaken to see that allowances are made when alternatives are considered outsidethat range.2. Some unit costs are an allocation of fixed costs; thus when a higher volume ofoutput is being considered, unit cost will decrease proportionately, and vice versa. Two other reasons are mentioned in the text:1. Some unit costs are based on both relevant and irrelevant factors and should bebroken down further before being considered.2. Unit costs must be reduced to the same base (denominator) before comparing orcombining them.6-21 Sales personnel sometimes neglect to point out that the unit costs are based on outputs far in excess of the volume of their prospective customer.6-22 An inconsistency between a decision model and a performance evaluation model occurs when a decision about whether to replace a piece of equipment is based on the cash flow effects over the life of the equipment but a manager's performance evaluation is based on the first year's reported income. The loss on disposal of the equipment is irrelevant for decision purposes, but it affects the first year income, hence the performance evaluation.6-23 The wide use of income statements to evaluate performance may overly influence managers to maximize short-run performance that may hurt long-run performance. They may pass up profitable opportunities to replace equipment because of the large loss on disposal shown on the first year’s income statement.6-24 Yes, this statement is generally correct. Accountants record transactions. But opportunity cost is the cost of transactions that do not occur (or have not occurred yet). It is the cost of opportunities forgone. Managers usually have much better information about forgone opportunities than do accountants.6-25 Deciding whether to outsource payroll functions requires estimates of the cost of designing, maintaining, and using a payroll system internally compared to the cost of a contract with an outside supplier. To operate an internal payroll system requires hiring personnel with the needed expertise in both legal/governmental issues affecting payroll and information processing to implement a system. Small companies often find it less costly to outsource payroll to a company that has broad expertise in these areas.6-26 Whenever total costs are unitized by dividing by total units and the resulting unit costs are then used to predict new total costs based on a different level of production, errors are being made if any of the costs are fixed. If the new production level is higher, predicted total costs are overestimated. If the new production level is lower, predicted total costs are underestimated. Never unitize fixed costs if the resulting unit cost will be used for planning purposes!Consider the following simple example:Fixed Cost Variable Cost TotalTotal $100 $100 $200Units ÷10 ÷10 ÷10Unit Cost $10 $10 $20If a new planned number of units is 20, what will be the new, predicted total cost?The correct cost function and cost prediction isTotal Cost = $100 + $10 × Number of units= $100 + $10 × 20 =$300The correct cost function is based on the two amounts that are constant within the relevant range – the total fixed cost and the unit variable cost.The incorrect unitized cost function and incorrect and overestimated prediction isTotal Cost = $20 × Number of units= $20 × 20= $400It is easy to see that the error comes from treating fixed costs as if they were variable.6-27 The amount paid for inventory is a sunk cost. Once a company has the inventory, it cannot change what it paid for it. Thus the only relevant issue is what can be done with the inventory. If there is a choice of selling the inventory for less than what the company paid for it or not selling it at all, it is certainly better to get something rather than nothing for it.6-28 (10-15 min.)1. IndependentPractice Employee DifferenceOperating revenues $350,000 $110,000 $240,000 Operating expenses 220,000 -- 220,000 Income effects per year $130,000 $110,000 $ 20,000Choose Independent Practice Revenues $350,000 Expenses:Outlay costs $220,000Opportunity cost of employee compensation 110,000 330,000 Income effects per year $ 20,000 Each tabulation produces the key difference of $20,000. As a general rule, wefavor using the first tabulation when feasible. It offers a straightforwardpresentation of inflows and outflows under sharply stated alternatives.2. Choice as EmployeeRevenue $ 110,000Expenses:Outlay costs $ 0Opportunity cost of accounting practice 130,000 130,000Income effects per year $ (20,000)If the employee alternative is selected, the key difference in favor of becoming asole practitioner is again $20,000. Bridgeman is sacrificing $20,000 to avoid therisks of an independent practice.6-29 (10-15 min.)Alternatives Under Consideration(1) (2) (1) - (2)Sell, Rent, and HoldInvest in Bonds Present Home DifferenceRevenue $10,000* $ - $10,000 Less: Outlay cost 12,000 6,000 6,000 Income effects per year $ (2,000) $(6,000) $ 4,000 *5%× $200,000Advantage of selling the home is $6,000 - $2,000 = $4,000. Obviously, if rent is higher, the advantage decreases.The above analysis does not contain explicit opportunity costs. If opportunity costs were a part of the analysis, the following presentation applies (whereby the interest on investment in bonds is not listed as a separate alternative but is regarded as a forgone alternative):Alternative Chosen:Hold Present HomeOpportunity cost $(10,000)Outlay cost 6,000Income effects per year $ (4,000)As before, the advantage of selling the home and renting is $4,000. The opportunity cost of home ownership is 5% × 200,000 = $10,000.6-30 (15-20 min.) Opportunity cost is the maximum available contribution to profit forgone by using limited resources for a particular purpose. In this case, the opportunity cost of the machine when analyzing the alternative to produce 12-oz. bottles of Juice Cocktails is $90,000, the larger of the $90,000 contribution margin from additional sales of the 100% Juices or the $75,000 proceeds from the sale of the machine. The $160,000 historical cost of the machine is a past cost and thus irrelevant.6-31 (15-20 min.) The first tabulation is probably easier to understand, but the choiceof a tabulation is a matter of taste:(a) (b) (c)Expand Expand Rent toLaboratory Eye GiftTesting Clinic Shop Revenues $330,000 $500,000 $11,000Expenses 290,000 480,000 0Income effects per year $ 40,000 $ 20,000 $11,000Treating the gift shop as the forgone (rejected) alternative, the tabulation is:(a) (b)Expand ExpandLaboratory Testing Eye Clinic Revenue $330,000 $500,000 Expenses:Outlay costs $290,000 $480,000Opportunity cost,rent forgone 11,000 301,000 11,000 491,000 Income effects per year $ 29,000 $ 9,000The numbers favor laboratory testing, which will generate a contribution to hospital income that is $20,000 greater than the eye clinic's.The numbers have been analyzed correctly under both tabulations. Both answer the key query: What difference does it make? As a general rule, we prefer using the first tabulation. It is a straightforward presentation.6-32 (15 min.)1. It is easiest to analyze total costs, not unit costs.Make PurchaseDirect materials $400,000Avoidable overhead costs:Indirect labor 30,000Supplies 20,000Allocated occupancy cost 0Purchase cost $420,000Total relevant costs $450,000 $420,000The difference in favor of purchasing is $450,000 - $420,000 = $30,000.2. Because the quantitative difference is small, qualitative factors may dominate thedecision. Companies using a just-in-time system need assurance of both qualityand timeliness of supplies of materials, parts, and components. A small, localcompany may not be reliable enough for Bose. In essence, Bose may be willing to "invest" $30,000, the quantitative advantage of purchasing, in order to have more control over the supply of the components.The division manager may have made the right decision for the wrong reason. He incorrectly ignored avoidable fixed costs, leading to a mistaken belief that making the components was less costly by $.20 per unit or $20,000 in total. The $50,000 of avoidable fixed costs makes the purchase option less costly by $30,000. If themanager's decision is to make the component, it should be because forgoingprofits of $30,000 has a long-run qualitative benefit of more than $30,000, notbecause the bid is greater than the variable cost6-33 (20-25 min.)Nantucket Nectars should make the bottles.Make BuyPer PerTotal Bottle Total Bottle Purchase cost $250,000 $.250 Direct materials $80,000 $.080Direct labor 30,000 .030Variable overhead 60,000 .060Avoidable fixedoverhead 60,000 .060Total relevant costs $230,000 $.230 $250,000 $.250 Difference in favor of making $ 20,000 $.0206-34 (15-20 min.)Buy andUse。