Classic Loungers Is in the Process of Preparing a Production

question 118

Multiple Choice

Classic Loungers is in the process of preparing a production cost budget for August. Actual costs in July for 200 chaise lounge chairs were: $\begin{array}{lr}\text { Materials cost } & \$ 6,000 \\\text { Labor cost } & 8,000 \\\text { Rent } & 2,000 \\\text { Depreciation } & 4,000 \\\text { Other fixed costs } & 5,000 \\\text { Total } & \$ 25,000\end{array}$ Each chair is sold for $140 in July. The company plans to lower the selling price to $130 per chair at which management estimates that sales will increase to 230 chairs. Materials and labor are the only variable costs. Under what situation should the company lower the price of its chaise lounge chairs?

• A) If total revenue exceeds totals costs under the new pricing
• B) If incremental revenue exceeds the old revenue
• C) If incremental profit is a positive number
• D) If incremental costs decrease

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Definitions:

Feedback Controls

Take place after an action is completed.

End Results

The final outcomes or objectives that are aimed for in a business or project management context.

Future Planning

The process of setting goals and developing strategies for achieving them in the future, often involving forecasting and scenario analysis.

Feedforward Controls

Ensure that directions and resources are right before the work begins.