Chapter18 Solutions-Hansen6e

Chapter18 Solutions-Hansen6e - CHAPTER 18 ACTIVITY RESOURCE...

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CHAPTER 18 ACTIVITY RESOURCE USAGE MODEL AND TACTICAL DECISION MAKING QUESTIONS FOR WRITING AND DISCUSSION 1. Tactical decision making is choosing among alternatives with an immediate or limited end in mind. 2. Tactical decisions should support the overall strategic objectives of an organization. Often, the stra- tegic objectives are served by small-scale actions. For example, making a part instead of buying it may lower costs of production and thus serve the strategic cost leadership objective. Or it may serve the objective of differentiation by helping to produce a higher-quality final product than produced by competitors. 3. Tactical cost analysis is the use of relevant cost data to identify the alternative that provides the greatest benefit to the organization. Steps 3–5 are the major components of tactical cost analysis: predicting costs, comparing relevant costs, and selecting the lowest cost alternative (or alternative with the greatest benefit). 4. Answers will vary. I (second author) have used this as a writing assignment for several years. It has been very successful; students enjoy analyzing their own decisions, whether it is buying a car, mov- ing from the dorm into an apartment, or buying a puppy. Sometimes, the application of the model leads to new insights into their problems. 5. Relevant costs and revenues are future costs and revenues that differ across alternatives. Depreci- ation on an existing asset represents an allocation of a past cost. Past costs are sunk costs and therefore seldom relevant. 6. A future cost that is not relevant is a future cost that does not differ across the alternatives being con- sidered. For example, rent on a factory in a keep-or-drop decision is a future cost, but it will be there whether one of the factory’s products is dropped or kept. 7. Disagree. Relevant costs are just part of the overall tactical decision model. Strategic effects and oth- er qualitative factors may affect the decision. The effect may be such that a higher-cost alternative may be chosen. 8. Yes, direct materials can be irrelevant. In a make-or-buy decision, any direct materials already in in- ventory are irrelevant. In a make-or-buy decision, the salary of the production supervisor would be fixed but relevant to the decision. Leasing equipment is relevant if it is a future cost that differs across alternatives. In most cases, this would not be a factor because it entails the acquisition of multiperiod capacity and really belongs to the capital expenditure decision domain. 9. The only role of past costs is predictive. They can be used to help predict future costs. 10. Flexible resources are relevant whenever the demand for an activity changes across alternatives. Re- source spending will differ across alternatives, making the cost of the activity relevant. 11.
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This note was uploaded on 01/31/2011 for the course ACCT 360 taught by Professor N/a during the Spring '10 term at Mountain State.

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Chapter18 Solutions-Hansen6e - CHAPTER 18 ACTIVITY RESOURCE...

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