Pick the better option each round

Exercise and reference answers

Questions

1. Question

   Cases cost $36.40 to make in house or $37.90 to buy in.

   Choices

   1. Make them
   2. Buy them in

   Correct choice

   Make them

2. Question

   A four year lease returns $9,700; an outright sale returns $9,800.

   Choices

   1. Lease it out
   2. Sell it

   Correct choice

   Sell it

3. Question

   Keeping the machine costs $126,000; replacing it costs $143,000.

   Choices

   1. Keep the old one
   2. Buy the new one

   Correct choice

   Keep the old one

4. Question

   Selling the batch now earns $19,500; processing on earns $21,600.

   Choices

   1. Sell it now
   2. Process it further

   Correct choice

   Process it further

5. Question

   A special order adds $180,000 of revenue and $125,800 of extra cost.

   Choices

   1. Accept the order
   2. Reject the order

   Correct choice

   Accept the order

6. Question

   A loss making line still brings in revenue above its variable costs.

   Choices

   1. Drop the line
   2. Keep selling it

   Correct choice

   Keep selling it

Instructions

Tap the alternative with the better financial outcome.

Explanation