Refer to the Scenario Below to Answer the Following Questions

question 53

Multiple Choice

Refer to the scenario below to answer the following questions.
Decision-making Biases (Scenario)
Frank is president of Mega Manufacturing, a Canadian company that makes automobile parts. Sales and profits are down sharply this quarter, and Frank needs to analyze the series of events that have led to the poor performance. Frank begins by reviewing his recent interactions with Mike, the vice-president of sales.
-Mike asked Frank to authorize the expenditure of an additional $30,000 to continue to pursue the contract with the Japanese car maker, even though there is no indication that they will reconsider their decision. As Mike explained, "My sales team has already spent close to $100,000 in time and effort trying to win that contract. What's another $30,000 to try to convince them to switch to Mega?" Mike's fixation on past expenditures demonstrates which of the following?

• A) confirmation bias
• B) hindsight bias
• C) overconfidence bias
• D) sunk costs error
• E) anchoring effect

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Definitions:

Ending Inventory

The total value of all goods still available for sale at the end of an accounting period.

Beginning Inventory

The amount of inventory a company has at the start of an accounting period.

Markup

The sum added onto the purchase price of products to encompass both overhead expenses and profit margins.

Average Inventory

The mean amount of inventory held by a business over a specific period of time, calculated to assess inventory management efficiency.