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1. PART A
CASE STUDY 1
PandaCorporationhasfour operatingdivisions.Duringthe firstquarterof 2014, the company
reportedaggregate income fromoperationsof $129,000 and the divisionalresultsshownbelow.
DivisionI DivisionII DivisionIII DivisionIV
Sales $510,000 $400,000 $310,000 $170,000
Cost of sales $300,000 $250,000 $270,000 $156,000
Sellingand
admin expenses
$60,000 $80,000 $75,000 $70,000
Total profit $150,000 $70,000 ($35,000) ($56,000)
Analysisrevealsthe followingpercentagesof variable costsineachdivision.
DivisionI DivisionII DivisionIII DivisionIV
Cost of sales 70% 80% 70% 90%
Sellingand admin
expenses
40% 50% 60% 70%
Discontinuance of anydivisionwouldsave 50% of the fixedcostsandexpensesforthatdivision. Top
managementisveryconcernedaboutthe unprofitable divisions(IIIandIV).Consensusisthatone or
bothof the divisionsshouldbe discontinued.
Required:
A. Prepare an incremental analysisconcerningthe possiblediscontinuance of
i.DivisionIII and
ii.DivisionIV.
B. Based onyour analysisinabove,whatcourse of actiondo yourecommendforeachdivision?
Justifyyourrecommendation.
C. Prepare a columnarcondensedincomestatementforPandaCorporation,assumingDivisionIV is
eliminated.DivisionIV’sunavoidablefixedcostsare allocatedequallytothe continuingdivisions.
D. Reconcile the total income fromoperations($129,000) withthe total income fromoperations
withoutDivisionIV.
CASE STUDY 2
McCree Corporationhada bad yearin 2013, operatingat a lossfor the firsttime initshistory.The
company’sincome statementshowedthe followingresultsfromselling200,000 unitsof product:
netsales$2,400,000; total costs and expenses$2,472,000; and netloss$72,000. Costs andexpenses
consistedof the following.

2. Variable Fixed
Cost of sales $1,070,000 $416,000
Sellingexpenses $356,000 $325,000
Adminexpenses $110,000 $195,000
Total $1,536,000 $936,000
Managementisconsideringthe followingindependentalternativesfor2014.
1. Increase unitsellingprice 25%withnochange incosts andexpenses.
2. Change the compensationof salespersonsfromfixedannual salariestotalling$170,000 to total
salariesof $50,000 plusa 6% commissiononnetsales.
3. Purchase newhigh-techfactorymachinerythatwill change the proportionbetweenvariable and
fixedcostof goodssoldto 40:60.
Required:
A. Compute the break-evenpointindollarsfor2014.
B. Compute the break-evenpointindollarsundereachof the alternative coursesof action.Which
course of actiondo yourecommend?
C. “Break-evenanalysisisof limiteduse tomanagementbecause a companycannotsurvive byjust
breakingeven.”Doyouagree?Explain.
CASE STUDY 3
Easton Corporationmakestwodifferentboatanchors—atraditional fishinganchoranda highend
yacht anchor—usingthe same productionmachinery.The contributionmarginof the yacht anchoris
three timesashighas that of the otherproduct.The companyiscurrentlyoperatingat full capacity
and has beendoingsofornearlytwoyears.
BjornBorg, the company’sCEO,wants to cut back on productionof the fishinganchorsothat the
companycan make more yachtanchors. He says that thisisa “no-brainer”because the contribution
marginof the yacht anchor isso muchhigher.
Required:
Write a short memoto BjornBorg describingthe analysisthat the companyshoulddobefore it
makesthisdecisionandanyotherconsiderationsthatwouldaffectthe decision.
PART B
You had to practicallyapply the decisionmakingmodelsandtoolsyouhave learnedabout
throughoutthe subject.Reflectonyourexperience incompleting the variousassessmentsinthis
course.What majorlearningonmeasurementanddecisionmaking canyouapplyin practice as a
managerin yourorganisation?
The listbelowprovidessome questionsyoumaywishtoconsiderinyourcritical reflection.These
are suggestionsonly.Youmayaddressissuesthatare not on thislist.

3. 1. Has whatyou have learnedinthissubjectcreatedanincreasedawarenessof the importance of
decisionmakingasa managementactivity?Whyorwhy not?
2. Whichmodel ortool most influencedyouasyouworkedyourwaythroughthe subject?Why?
3. Howcritical do youbelieve the qualityof decisionmakingistoanorganisation?Why?
4. Whichof the modelsandtoolswouldyouuse asa manager?Why?