Question

Identify three phases of decision making and briefly discuss the role of each in the decision process

Question #2: Peter Pan Inc produces unassembled picture frames at the following average per-unit costs: Direct Materials $X, Direct Labor $Y and manufacturing overhead $Z. Peter is considering processing further and assembling the frames at a unit cost of $2.50 and raise the selling price from $11 to $15. As head of the accounting department discuss with Mr. Pan any apparent advantages or disadvantages of assembling the frames? Do you think they should assemble the frames - support your answer?

Answer 1

1. The three stages of the decision making may be summarised as follows:-

Formulate :- This step include define objectives, Gather data, and create the alternatives. This is the important stage of a decisiona making process. The purpose of the decision making is defined in this stage. For any type of decision making, we require the data and with this data various alternatives will be generated in this stage

Analysis :- After developing the alternatives as per the stage-1, now the next step is to analyse the same. While analysing the decision maker should keep focus on the objective of the decision making and the feasibility and viability of the decision . This is very important stage of the decision making process as datta collected in the first stage is used effectively at micro level and will help to take a decision which is most suitable to the circumstances

Decide and implement:- Here the decision maker will choose the best alternative as per the analsis and will implement the same . After implementing the decision, the progress of the same need to be monitored periodically  and if any change is required, the same is required to be effected. The importance of this stage is so high that success of the decision making is depending on the successful implementation and monitoring.

2.

1. Advantages of the Further assembling:-

a. It will increase the profitablity by $1.5 per unit. b) It will help to increase the image of the company from as seller of the semi finished goods to the seller of the finished products. So it can attract more variety of the customers

  2 Disadvantages:-

a. Increase in working capital requirement  as the liquidation of inventory will take more time to assemble the products. b) The company may require to increase the capacity and so additional investment may require

Decision :- Peter Pan inc will be definitely beneficial in assembling the Frames if the company is able to find  the investment requirement at reasonable rate.