Assignment Requirements
Read Self Test Question 4. I would like you to use the information from this question to respond to the following:
•What decision making model would you use to make this decision?
•Are any of the decision-making traps discussed in our text in danger of clouding your judgement?
•Would any of the tools and techniques for making better decisions assist us in this decision?
•What is your final decision and why?
Please be aware that I am not asking you to provide the calculations for this problem. While I would like you to understand how the problem is solved, the solutions are at the end of the section, so you should have the accurate information to make your final decision. The point of this paper is for you to apply the decision making techniques to the area of managerial accounting. In addition, use the above bullets as a guide for your paper…I do not want to see these listed as individual sections within your paper.
BSE Veterinary Services is a specialist laboratory carrying
out tests on cattle to ascertain whether the cattle have any
infection. At present, the laboratory carries out 12,000 tests
each period but, because of current difficulties with the beef
Let me know if you have further questions.
Professor Halsey herd, demand is expected to increase to 18,000 tests a period,
which would require an additional shift to be worked.
The current cost of carrying out a full test is:
£
per test
Materials
115
Technicians ’
wages
30
Variable overhead
12
Fixed overhead
50
Working the additional shift would:
(i)
Require a shift premium of 50 per cent to be paid to the
technicians on the additional shift.
(ii)
Enable a quantity discount of 20 per cent to be obtained
for all materials if an order was placed to cover 18,000
tests.
(iii)
Increase fixed costs by £700,000 per period.
The current fee per test is £300.
Ideally, you should have an introduction paragraph that summarizes the problem that you are trying to solve. The body of the paper would explain how you are going to solve the problem, what traps you may encounter ( and why) as well as what tools you could use (and how). You should end the paper by explaining what your final decision is (whether to take on the extra tests and how you will accomplish this).
Make sure that you put a majority of the information into your own words while still citing your source for the information. While it is acceptable to use a direct quote here and there … it should not be the majority of your paper. Use the rational decision making process.
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