Integrated Managerial Accounting, Part 2

Midterms Activity # 1
Topic: Quantitative Techniques in Business

INSTRUCTIONS: Answer the following questions in any clean sheet of paper, take a picture of it afterwards and send your answers to
my e-mail address: roycecadapan1991@gmail.com
This assessment’s deadline coincides with the deadline set by the University but early submission is encouraged 
GOD BLESS PINAGPALA!

1. Royce Company is planning to manufacture its own new PC-based system, which intends to be marketed next year under its
own brand. One particular concern of the company has something to do with the keyboard that will be used in the system,
which will be having a special feature on the function keys. The following are the different decision alternatives identified by
the management:
a. The company can manufacture its own unique keyboard.
b. The company can buy the keyboard from a local manufacturer.
c. The company can buy the keyboards from Japan
The payoff table is given below.
Alternatives Future Low Sales Moderate Level High
Manufacture (30,000) 20,000 110,000
Buy from local 20,000 60,000 50,000
Buy from Japan 10,000 45,000 80,000
Required: Using the following decision-making under the condition of uncertainty techniques, determine which alternative should be
done by the company.
a. Maximax strategy
b. Maximin strategy
c. Laplace strategy
d. Hurwicz strategy
e. Minimax Regret strategy

2. Russel is planning to open up a new branch of Lolo Lomihan at a new location in Solana or expand the existing branch
located in Tuguegarao. Demand on the new location is expected to be 60% high and 40% low. Fixed cost will reach the
amount of P150,000. If the demand becomes high, he expects to have a revenue of P250,000, however if the demand
becomes low, he could only expect a revenue of P200,000. Upon analysing the situation in his existing branch, he believes
that by introducing new recipes the sales which the amount of P120,000 if the demand becomes high. However, if the
demand becomes low, he could expect P80,000 revenue. Projection on high demand in the existing branch tends to be 55%
and upon computing the fixed cost it would reach the amount of P50,000
Required:
a. What is the cost of perfect information?
b. If you were the consultant of Russel, what would you advise? Show supporting computations.

3. Betis Furniture has an order of 100 of its narra chairs. The chairs can be produced in two ways. One way is for the company to
produce the chair parts in its own shop at a cost of P25 per chair and use 20 minutes of grade 3 labor to assemble each chair.
Grade 3 labor is paid of P1.80/hour. The alternative method for filling the order is to purchase the parts of the chair form
competitor A, at a cost of P30 per chair parts and to use 15 minutes of grade 2 labor to assemble each chair. Grade 2 labor
earns P2/hour. The order must be filled during the next 20 days. If Betis orders the parts from the competitor, it must order at
least 50 sets of parts. A total of 20 hours of each of the two grades of labor could be available at the time of assembly.
Required:
Determine the best combination of the chair product to minimize cost.

4. Development of a new deluxe version of a particular software product is being considered. The activities necessary for the
completion of this are listed in the table below.

Activity Normal Crash Normal Crash Immediate

Time Time Cost Cost Predecessor
A 4 3 2000 2600 -
B 2 1 2200 2800 -
C 3 3 500 500 -
D 8 4 2300 2600 A
E 6 3 900 1200 B
F 3 2 3000 4200 C
G 4 2 1400 2000 D,E
Required:
a. What is the project completion date?
b. What is the total cost required for completing this project on normal time?
c. If you wish to reduce the time required to complete this project by one week, which activity should be crashed, and how much will
this increase the total cost?