Ch 11: Differential Analysis: The Key to Decision Making
which of the following techniques describe how a bottleneck should be managed?
- focus business process improvement efforts on the bottleneck - find ways to increase the capacity of the bottleneck - ensure there is minimal lost time at the bottleneck due to breakdowns and set-ups.
Product ABC has a contribution margin per unit of $10.00. Each unit of ABC requires 5 minutes of machine time. Product XYZ has a contribution margin per unit of $15.00 and each unit requires 10 minutes of machine time. If the company's constraint is machine hours, to maximize profit, they should first fill the demand for Product________
ABC
When a manager increases the capacity of constraint or (._________), it is called relaxing the constraint.
bottleneck
to increase the strength of a chain, efforts should be concentrated on strengthening _____________
the weakest link
the capacity of a bottleneck can be effectively increased by:
- focusing business process improvement efforts on the bottleneck - subcontracting some of the processing that would be done in that area.
when considering accepting a special order:
- there must be idle capacity - normal sales must not be affected
the machine or process that is limiting overall output is called
bottleneck
when a constraint exists, companies need to focus on maximizing...
contribution margin per unit of constraint
A one-time sales that is not considered part of the company's normal ongoing business is referred to as an ________________ _________________ decision.
special order
when making a decision, irrelevent items are included in the analysis of both alternatives when using __________.
the total cost approach only
When a shortage or limited resource of some type restricts a company's ability to satisfy demand, the company has a(n)
constraint
If some products must be cut back because of a constraint, produce the products with the highest ....
contribution margin per unit of constrained resource.
to maximize total contribution margin when a constrained resource exists, product the products with the ___________
highest contribution margin per unit of the constrained resource.
When there is a constrained resource, the best way to increase profits is to _________
increase the capacity of the bottleneck
allocated common costs are _________
only relevant to decisions if they are avoidable
Being less dependent on suppliers and making profits on both parts and the final product are advantages of ____________ ____________
vertical integration