Required: Present several examples of managerial accounting information that could help a manager make each of the following decisions:A. A manufacturing company is currently making a part that is a production headache. The firm is deciding whether to abandon production and buy the part from an outside supplier.B. An operator of fast-food restaurants is deciding whether to open a new store in Dallas.
What will be an ideal response?
Note: Many correct answers are possible.
A. The cost of each alternative (make vs. buy) would be needed along with information about suppliers that pertains to reliability and product quality (e.g., testimonials from a supplier's current customers that cite any problems with on-time deliveries, product stockouts, or abnormally high spoilage rates of purchased goods). Given the company is currently making the part, what would happen to the facilities if the firm begins to purchase from outside suppliers? Could the facilities be subleased, used for other profitable products, or downsized (with equipment being sold)? What would happen to existing employees-would there be any layoffs and how much would the company save?
B. The manager needs information about construction or leasing costs along with figures that focus on subsequent operating costs. Also, projected sales, market share figures, and data about competitors would be helpful.
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