Deck 13: Strategic Cost Management

Question 1

What strategy is a computer company following when it selects a mix of strategies in order to create sustainable competitive advantage?

A)a focusing strategy
B)a low-cost strategy
C)a differentiation strategy
D)a strategic positioning strategy

Answer 1

D

Question 2

What is the operational activity of moving inventory classified as?

A)a unit-level activity
B)a batch-level activity
C)a product-level activity
D)a facility-level activity

Answer 2

B

Question 3

What is the term for the relationships among activities that are performed with a firm's portion of the value chain?

A)external linkages
B)internal linkages
C)industrial linkages
D)value linkages

Answer 3

B

Question 4

What is the complete range of tangible and intangible benefits that a customer receives from a purchased product?

A)competitive product
B)strategic product
C)activity product
D)total product

Question 5

What is the term for factors that drive the cost of day-to-day activities performed as a result of the structure and processes selected by the organization?

A)organizational activities
B)organizational cost drivers
C)operational activities
D)operational cost drivers

Question 6

What is the term for the use of cost data to develop and identify superior strategies that will produce a sustainable competitive advantage?

A)strategic decision making
B)strategic cost management
C)competitive advantage
D)customer value

Question 7

What are plant layout,quality management systems,and providing capacity examples of?

A)executional activities
B)structural activities
C)operational activities
D)quality activities

Question 8

What strategy is a computer company following when it targets customers in the Maritimes?

A)a focusing strategy
B)a low-cost strategy
C)a differentiation strategy
D)a strategic allocation strategy

Question 9

What is the term for the relationships of a firm's value chain activities that are performed with its suppliers and customers?

A)external linkages
B)internal linkages
C)industrial linkages
D)value linkages

Question 10

What are structural and executional activities types of?

A)organizational activities
B)operating activities
C)just in time activities
D)total quality management activities

Question 11

What are structural and executional factors that determine the long-term cost structure of an organization?

A)organizational activities
B)organizational cost drivers
C)operational activities
D)operational cost drivers

Question 12

What does the industrial value-chain analysis determine?

A)It recognizes only complex linkages within the firm.
B)It is not compatible with differentiation strategies.
C)It is a linked set of value-creating activities.
D)It requires a firm to operate across the entire value chain.

Question 13

What strategy is a computer company following when it increases the internal storage space for the same price?

A)a focusing strategy
B)a low-cost strategy
C)a differentiation strategy
D)a strategic positioning strategy

Question 14

What are building plants and grouping employees examples of?

A)executional activities
B)structural activities
C)operational activities
D)total quality management

Question 15

What is a computer manufacturing company focusing on when it addresses supplier production problems?

A)external linkages
B)internal linkages
C)a differentiation strategy
D)a cost leadership strategy

Question 16

When has a competitive advantage been established?

A)when a company provides something to customers that is not provided by competitors
B)when a high-cost strategy increases customer value by minimizing customer sacrifices
C)when a low-profit item is dropped from the product line to increase the profitability of the firm overall
D)when a customer realizes that all the competing firms are offering the same product

Question 17

What is the term for the difference between what a customer receives and what the customer gives up?

A)strategic decision making
B)strategic cost management
C)competitive advantage
D)customer value

Question 18

What is the term for creating better customer value for the same or lower cost than competitors or creating equivalent value for lower cost than offered by competitors?

A)strategic decision making
B)strategic cost management
C)competitive advantage
D)total product

Question 19

Which of the following involves choosing among alternative strategies with the goal of selecting a strategy or strategies that provides a company with reasonable assurance of long-term growth and survival?

A)strategic decision making
B)strategic cost management
C)competitive advantage
D)customer value

Question 20

What strategy is a computer company following when it maintains the internal storage space for a lower price?

A)a focusing strategy
B)a cost leadership strategy
C)a differentiation strategy
D)a strategic positioning strategy

Question 21

Vitella Company manufactures a product sold to retailers. It is considering suppliers for its process. The supplier quality involves four activity areas:
$$\begin{array} { l l } \text { Activit Area } & \text { Cast Driver and Rate } \\\text { Order cost } & \$ 125 \text { per purchase order } \\\text { Defective units } & \$ 200 \text { per urit internal failure costs } \\\text { Delivery trips } & \$ 5 \text { per delivery kilametre } \\\text { Caryying cost } & \$ 1 \text { per order }\end{array}$$ The following supplier information is given:
$$\begin{array} { l r r r r } &\text {W4}&\text {X3}&\text {Y2}&\text {Z1}\\\text { Materials units meeded } & 100,000 & 100,000 & 100,000 & 100,000 \\\text { Actual purchase price } & \$ 4.98 & 55 & 54.99 & \$ 5.01 \\\text { Number of purchase orders } & 10 & 20 & 30 & 18 \\\text { Number of defects } & 3 & 6 & 12 & 0 \\\text { Nurgher of deliveries } & 25 & 20 & 30 & 18\end{array}$$

-Refer to the figure.What is the cost of supplier Z1?

A)$498,642
B)$499,000
C)$501,000
D)$503,358

Question 22

Vitella Company manufactures a product sold to retailers. It is considering suppliers for its process. The supplier quality involves four activity areas:
$$\begin{array} { l l } \text { Activit Area } & \text { Cast Driver and Rate } \\\text { Order cost } & \$ 125 \text { per purchase order } \\\text { Defective units } & \$ 200 \text { per urit internal failure costs } \\\text { Delivery trips } & \$ 5 \text { per delivery kilametre } \\\text { Caryying cost } & \$ 1 \text { per order }\end{array}$$ The following supplier information is given:
$$\begin{array} { l r r r r } &\text {W4}&\text {X3}&\text {Y2}&\text {Z1}\\\text { Materials units meeded } & 100,000 & 100,000 & 100,000 & 100,000 \\\text { Actual purchase price } & \$ 4.98 & 55 & 54.99 & \$ 5.01 \\\text { Number of purchase orders } & 10 & 20 & 30 & 18 \\\text { Number of defects } & 3 & 6 & 12 & 0 \\\text { Nurgher of deliveries } & 25 & 20 & 30 & 18\end{array}$$

-Refer to the figure.Which supplier has the most defective units?

A)X3
B)Y2
C)Z1
D)W4

Question 23

What is the operational activity of inspecting classified as?

A)a unit-level activity
B)a batch-level activity
C)a product-level activity
D)a facility-level activity

Question 24

What is the operational activity of setting up equipment classified as?

A)a unit-level activity
B)a batch-level activity
C)a product-level activity
D)a facility-level activity

Question 25

Clinton Corp. is a manufacturer of equipment used in manufacturing. It currently produces a product with 30 parts but through redesign has reduced the number of parts to 9. The current activity capacity and demand for the 30-unit configuration and expected activity demand for the 9-part configuration are provided below:
$\begin{array}{|l|l|c|c|c|}\hline\text { Activities } & \text { Activity } & \text { Activity } & \text { Current } & \text { Expected }\\&\text { Driver } & \text { Capacity } & \text { Activity Demand } & \text { Activity Demand }\\\hline \begin{array}{l}\text { Materials } \\\text { usage }\end{array} & \begin{array}{l}\text { number } \\\text { of parts }\end{array} & 300,000 & 300,000 & 90,000 \\\hline \text { Assembly } & \begin{array}{l}\text { direct } \\\text { labour } \\\text { hours }\end{array} & 20,000 & 20,000 & 6,000 \\\hline \begin{array}{l}\text { Purchasing } \\\text { parts }\end{array} & \begin{array}{l}\text { number } \\\text { of orders }\end{array} & 20,000 & 16,000 & 8,000 \\\hline\end{array}$ Materials usage has a rate of $5 per part and no fixed costs.Assembly has a rate of $20 per labour hour with no fixed component.Purchasing requires clerks who can process 5,000 purchase orders.Each clerk earns $40,000 per year.There is also a $1 per order processing cost.

-Refer to the figure.If 10,000 units are being produced and the sales price is $500,what is the new sales price if the cost savings are passed on to the consumer?

A)$91.80
B)$199.80
C)$280.20
D)$300.20

Question 26

What is total quality management?

A)an approach to production that focuses on decreasing overall production costs
B)an approach to product placement that allows for the product to be marketed to high quality customers
C)an approach where quality goals are set once and strictly adhered to
D)an approach to managing quality that demands the production of defect-free products

Question 27

Vibro Company sells a product used in many manufacturing processes. The sales activity involves three activity areas:
$$\begin{array} { l l } \text { Activity Area } & \text { Cost Driver and Rate } \\\text { Order taking } & \$ 100 \text { per purchase order } \\\text { Sales visits } & \$ 50 \text { per visit } \\\text { Delivery vehicles } & 11 \text { per delivery mile }\end{array}$$ The following customer information is given:
$\begin{array}{lrrrr}&\text {AX}&\text {BY}&\text {CV}&\text {DZ}\\\text { Units sold } & 100,000 & 80,000 & 70,000 & 60,000 \\\text { List price } & \$ 50 & \$ 50 & \$ 40 & \$ 50 \\\text { Actual sales price } & \$ 45 & \$ 48 & \$ 38 & \$ 50 \\\text { Number of purchase orders } & 30 & 20 & 15 & 10 \\\text { Number of sales visits } & 6 & 5 & 4 & 3 \\\text { Number of deliverv miles } & 100 & 80 & 70 & 60\end{array}$

-Refer to the figure.Which customer has the least activity costs?

A)AX
B)BY
C)DZ
D)CV

Question 28

Vitella Company manufactures a product sold to retailers. It is considering suppliers for its process. The supplier quality involves four activity areas:
$$\begin{array} { l l } \text { Activit Area } & \text { Cast Driver and Rate } \\\text { Order cost } & \$ 125 \text { per purchase order } \\\text { Defective units } & \$ 200 \text { per urit internal failure costs } \\\text { Delivery trips } & \$ 5 \text { per delivery kilametre } \\\text { Caryying cost } & \$ 1 \text { per order }\end{array}$$ The following supplier information is given:
$$\begin{array} { l r r r r } &\text {W4}&\text {X3}&\text {Y2}&\text {Z1}\\\text { Materials units meeded } & 100,000 & 100,000 & 100,000 & 100,000 \\\text { Actual purchase price } & \$ 4.98 & 55 & 54.99 & \$ 5.01 \\\text { Number of purchase orders } & 10 & 20 & 30 & 18 \\\text { Number of defects } & 3 & 6 & 12 & 0 \\\text { Nurgher of deliveries } & 25 & 20 & 30 & 18\end{array}$$

-Refer to the figure.Which supplier is least costly?

A)X3
B)Y2
C)Z1
D)W4

Question 29

What is the first link of the internal value chain?

A)design
B)develop
C)market
D)distribute

Question 30

What is the operational activity of assembling parts an example of?

A)a unit-level activity
B)a batch-level activity
C)a product-level activity
D)a facility-level activity

Question 31

Clinton Corp. is a manufacturer of equipment used in manufacturing. It currently produces a product with 30 parts but through redesign has reduced the number of parts to 9. The current activity capacity and demand for the 30-unit configuration and expected activity demand for the 9-part configuration are provided below:
$\begin{array}{|l|l|c|c|c|}\hline\text { Activities } & \text { Activity } & \text { Activity } & \text { Current } & \text { Expected }\\&\text { Driver } & \text { Capacity } & \text { Activity Demand } & \text { Activity Demand }\\\hline \begin{array}{l}\text { Materials } \\\text { usage }\end{array} & \begin{array}{l}\text { number } \\\text { of parts }\end{array} & 300,000 & 300,000 & 90,000 \\\hline \text { Assembly } & \begin{array}{l}\text { direct } \\\text { labour } \\\text { hours }\end{array} & 20,000 & 20,000 & 6,000 \\\hline \begin{array}{l}\text { Purchasing } \\\text { parts }\end{array} & \begin{array}{l}\text { number } \\\text { of orders }\end{array} & 20,000 & 16,000 & 8,000 \\\hline\end{array}$ Materials usage has a rate of $5 per part and no fixed costs.Assembly has a rate of $20 per labour hour with no fixed component.Purchasing requires clerks who can process 5,000 purchase orders.Each clerk earns $40,000 per year.There is also a $1 per order processing cost.

-Refer to the figure.What is the cost savings from purchasing parts?

A)$40,000
B)$48,000
C)$80,000
D)$88,000

Question 32

What do identifying profitable and unprofitable customers exploit?

A)supplier linkages
B)the product life cycle
C)consumable life
D)customer linkages

Question 33

Clinton Corp. is a manufacturer of equipment used in manufacturing. It currently produces a product with 30 parts but through redesign has reduced the number of parts to 9. The current activity capacity and demand for the 30-unit configuration and expected activity demand for the 9-part configuration are provided below:
$\begin{array}{|l|l|c|c|c|}\hline\text { Activities } & \text { Activity } & \text { Activity } & \text { Current } & \text { Expected }\\&\text { Driver } & \text { Capacity } & \text { Activity Demand } & \text { Activity Demand }\\\hline \begin{array}{l}\text { Materials } \\\text { usage }\end{array} & \begin{array}{l}\text { number } \\\text { of parts }\end{array} & 300,000 & 300,000 & 90,000 \\\hline \text { Assembly } & \begin{array}{l}\text { direct } \\\text { labour } \\\text { hours }\end{array} & 20,000 & 20,000 & 6,000 \\\hline \begin{array}{l}\text { Purchasing } \\\text { parts }\end{array} & \begin{array}{l}\text { number } \\\text { of orders }\end{array} & 20,000 & 16,000 & 8,000 \\\hline\end{array}$ Materials usage has a rate of $5 per part and no fixed costs.Assembly has a rate of $20 per labour hour with no fixed component.Purchasing requires clerks who can process 5,000 purchase orders.Each clerk earns $40,000 per year.There is also a $1 per order processing cost.

-Refer to the figure.What is the total cost reduction of the new design?

A)$1,414,000
B)$1,418,000
C)$1,984,000
D)$1,998,000

Question 34

What is the last link of the internal value chain?

A)design
B)service
C)market
D)distribute

Question 35

What are activities required to design,develop,produce,market,distribute,and service a product known as?

A)whole-life activities
B)value-chain activities
C)target activities
D)overhead

Question 36

Vibro Company sells a product used in many manufacturing processes. The sales activity involves three activity areas:
$$\begin{array} { l l } \text { Activity Area } & \text { Cost Driver and Rate } \\\text { Order taking } & \$ 100 \text { per purchase order } \\\text { Sales visits } & \$ 50 \text { per visit } \\\text { Delivery vehicles } & 11 \text { per delivery mile }\end{array}$$ The following customer information is given:
$\begin{array}{lrrrr}&\text {AX}&\text {BY}&\text {CV}&\text {DZ}\\\text { Units sold } & 100,000 & 80,000 & 70,000 & 60,000 \\\text { List price } & \$ 50 & \$ 50 & \$ 40 & \$ 50 \\\text { Actual sales price } & \$ 45 & \$ 48 & \$ 38 & \$ 50 \\\text { Number of purchase orders } & 30 & 20 & 15 & 10 \\\text { Number of sales visits } & 6 & 5 & 4 & 3 \\\text { Number of deliverv miles } & 100 & 80 & 70 & 60\end{array}$

-Refer to the figure.Which customer is most profitable?

A)AX
B)BY
C)DZ
D)CV

Question 37

Clinton Corp. is a manufacturer of equipment used in manufacturing. It currently produces a product with 30 parts but through redesign has reduced the number of parts to 9. The current activity capacity and demand for the 30-unit configuration and expected activity demand for the 9-part configuration are provided below:
$\begin{array}{|l|l|c|c|c|}\hline\text { Activities } & \text { Activity } & \text { Activity } & \text { Current } & \text { Expected }\\&\text { Driver } & \text { Capacity } & \text { Activity Demand } & \text { Activity Demand }\\\hline \begin{array}{l}\text { Materials } \\\text { usage }\end{array} & \begin{array}{l}\text { number } \\\text { of parts }\end{array} & 300,000 & 300,000 & 90,000 \\\hline \text { Assembly } & \begin{array}{l}\text { direct } \\\text { labour } \\\text { hours }\end{array} & 20,000 & 20,000 & 6,000 \\\hline \begin{array}{l}\text { Purchasing } \\\text { parts }\end{array} & \begin{array}{l}\text { number } \\\text { of orders }\end{array} & 20,000 & 16,000 & 8,000 \\\hline\end{array}$ Materials usage has a rate of $5 per part and no fixed costs.Assembly has a rate of $20 per labour hour with no fixed component.Purchasing requires clerks who can process 5,000 purchase orders.Each clerk earns $40,000 per year.There is also a $1 per order processing cost.

-Refer to the figure.What is the savings in materials usage cost with the new design changes?

A)$210,000
B)$400,000
C)$1,050,000
D)$1,500,000

Question 38

What is the process that analyzes how costs and other financial factors vary as different bundles of activities are considered to strengthen a firm's strategic position?

A)exploiting linkages
B)design
C)cost driver analysis
D)distribution

Question 39

What activities are included in the industry value chain?

A)shareholder value chain activities as well as firm activities
B)buyer and supplier value chain activities as well as firm activities
C)only firm activities
D)only firm production activities

Question 40

What is the operational activity of redesigning products classified as?

A)a unit-level activity
B)a batch-level activity
C)a product-level activity
D)a facility-level activity

Question 41

What stage of the product life cycle is the period of time when sales increase at an increasing rate?

A)introduction stage
B)growth stage
C)maturity stage
D)decline stage

Question 42

Which of the following are stages of the consumable life-cycle viewpoint?

A)logistics,maintaining,purchasing
B)disposal,logistics,purchasing
C)disposal,maintaining,purchasing
D)disposal,maintaining,logistics

Question 43

What stage of the product life cycle is the period of time when sales increase at a decreasing rate?

A)introduction stage
B)growth stage
C)maturity stage
D)decline stage

Question 44

What viewpoint describes the general sales pattern of a product as it passes through the introduction,growth,maturity,and decline stages?

A)accounting viewpoint
B)customer viewpoint
C)production viewpoint
D)marketing viewpoint

Question 45

What is the length of time that a product serves the needs of customers?

A)product life cycle
B)revenue-producing life
C)consumable life
D)introduction stage

Question 46

Which viewpoint of the product life-cycle is customer-value oriented?

A)production life-cycle viewpoint
B)marketing life-cycle viewpoint
C)consumable life-cycle viewpoint
D)planning life-cycle viewpoint

Question 47

Which of the following are stages of the marketing viewpoint of the product life cycle?

A)decline,growth,maturity
B)production,growth,maturity
C)decline,production,maturity
D)decline,growth,production

Question 48

Vibro Company sells a product used in many manufacturing processes. The sales activity involves three activity areas:
$$\begin{array} { l l } \text { Activity Area } & \text { Cost Driver and Rate } \\\text { Order taking } & \$ 100 \text { per purchase order } \\\text { Sales visits } & \$ 50 \text { per visit } \\\text { Delivery vehicles } & 11 \text { per delivery mile }\end{array}$$ The following customer information is given:
$\begin{array}{lrrrr}&\text {AX}&\text {BY}&\text {CV}&\text {DZ}\\\text { Units sold } & 100,000 & 80,000 & 70,000 & 60,000 \\\text { List price } & \$ 50 & \$ 50 & \$ 40 & \$ 50 \\\text { Actual sales price } & \$ 45 & \$ 48 & \$ 38 & \$ 50 \\\text { Number of purchase orders } & 30 & 20 & 15 & 10 \\\text { Number of sales visits } & 6 & 5 & 4 & 3 \\\text { Number of deliverv miles } & 100 & 80 & 70 & 60\end{array}$

-Refer to the figure.What is the profitability of customer BY?

A)$2,330,000
B)$3,837,670
C)$3,840,000
D)$4,000,000

Question 49

Which of the life-cycle viewpoints is the revenue-oriented viewpoint?

A)consumable life-cycle viewpoint
B)production viewpoint
C)marketing viewpoint
D)planning viewpoint

Question 50

What does life-cycle cost management consist of?

A)actions taken to enable a product to be designed,developed,produced,marketed,distributed,operated,maintained,serviced,and disposed of in order to maximize profits
B)actions to extend the life of a product through design,development,production,and maintenance
C)actions that focus on minimizing the cost of developing,designing,producing,distributing,operating,servicing,and disposal of a product
D)actions taken to design,develop,test,market,distribute,maintain,service,and dispose of a product to maximize revenues

Question 51

What stage of the product life cycle is characterized by preproduction and start-up activities?

A)introduction stage
B)growth stage
C)maturity stage
D)decline stage

Question 52

What is the time a product exists-from conception to abandonment?

A)product life cycle
B)revenue-producing life
C)consumable life
D)introduction stage

Question 53

What viewpoint defines stages of the life cycle by changes in the type of activities performed?

A)accounting viewpoint
B)customer viewpoint
C)production viewpoint
D)marketing viewpoint

Question 54

Which of the life-cycle viewpoints is the cost-oriented viewpoint?

A)product life-cycle viewpoint
B)consumable life-cycle viewpoint
C)production life-cycle viewpoint
D)planning life-cycle viewpoint

Question 55

At what stage of the product life cycle is a product when it loses market acceptance?

A)introduction stage
B)growth stage
C)maturity stage
D)decline stage

Question 56

At which stage of the consumable life-cycle is price sensitivity low?

A)introduction
B)growth
C)maturity
D)decline

Question 57

Which stage of the marketing life cycle has slow sales growth with peak sales?

A)introduction
B)growth
C)maturity
D)decline

Question 58

What does life-cycle cost management emphasize?

A)cost control
B)cost reduction
C)normal costing
D)process costing

Question 59

Which of the following are stages of the production life-cycle viewpoint?

A)purchasing,production,logistics
B)planning,purchasing,logistics
C)planning,production,logistics
D)planning,production,purchasing

Question 60

Which of the following are stages of the production life-cycle viewpoint?

A)design,research,testing
B)introduction,research,testing
C)design,introduction,testing
D)design,research,introduction

Question 61

What is the goal of total quality control?

A)to have less defective material than good material
B)to permit defects as long as they do not exceed a certain level
C)to have zero defects
D)to strengthen the push-through system

Question 62

What type of manufacturing reduces inventory levels because production is geared to demand?

A)traditional
B)conventional
C)just in time
D)total quality management

Question 63

Brad Company developed the following budgeted life-cycle income statement for two proposed products. Each product’s life cycle is expected to be two years.
$\begin{array}{llll}&\underline{ \text { Product A}}&\underline{ \text {Product B}}&\underline{ \text {Total}}\\\text { Sales } & \$ 200,000 & \$ 200,000 & \$ 400,000 \\\text { Cost of goods sold } & \underline{120,000} & \underline{130,000} & \underline{250,000} \\\text { Gross profit } & \underline{\$ 80,000 }&\underline{ \$ 70,000} & \$ 150,000\\\text { Period expenses:}\\\text { Research and development}&&&(70,000)\\\text { Marketing}&&&\underline{ (50,000)}\\\text { Life-cycle income }&&&\underline{ \$30,000}\end{array}$ A 10 percent return on sales is required for new products.Because the proposed products did not have a 10 percent return on sales,the products were going to be dropped.
Relative to Product B,Product A requires more research and development costs but fewer resources to market the product.Sixty percent of the research and development costs are traceable to Product A,and 30 percent of the marketing costs are traceable to Product A.

-Refer to the figure.What would be the return on sales for Product A?

A)2.5%
B)11.5%
C)25.0%
D)40.0%

Question 64

Which of the following is one of the ways that JIT manufacturing differs from traditional manufacturing?

A)the treatment of direct materials and direct labour for product costing
B)the increasing level of inventories
C)the approach to inspecting quality in
D)the physical layout of the manufacturing process

Question 65

Rudy Company sells a product for $450 per unit. Its market share is 25 percent. The marketing manager feels that the market share can be increased to 33 percent with a reduction in price to $390. The product is currently earning a profit of $72 per unit. The president of Rudy Company feels that the $72 profit per unit must be maintained.

-Refer to the figure.What is the original cost per unit?

A)$159
B)$189
C)$195
D)$225

Question 66

What is information for life-cycle cost management supported by?

A)functional-based costing system
B)activity-based costing system
C)normal costing system
D)actual costing system

Question 67

Rudy Company sells a product for $450 per unit. Its market share is 25 percent. The marketing manager feels that the market share can be increased to 33 percent with a reduction in price to $390. The product is currently earning a profit of $72 per unit. The president of Rudy Company feels that the $72 profit per unit must be maintained.

-Refer to the figure.What is the original cost per unit?

A)$318
B)$378
C)$390
D)$450

Question 68

Rudy Company sells a product for $450 per unit. Its market share is 25 percent. The marketing manager feels that the market share can be increased to 33 percent with a reduction in price to $390. The product is currently earning a profit of $72 per unit. The president of Rudy Company feels that the $72 profit per unit must be maintained.

-Refer to the figure.What is the target price per unit?

A)$159
B)$189
C)$195
D)$225

Question 69

Rudy Company sells a product for $450 per unit. Its market share is 25 percent. The marketing manager feels that the market share can be increased to 33 percent with a reduction in price to $390. The product is currently earning a profit of $72 per unit. The president of Rudy Company feels that the $72 profit per unit must be maintained.

-Refer to the figure.What is the target cost per unit?

A)$159
B)$189
C)$195
D)$225

Question 70

Which of the following is a trait of a traditional manufacturing system?

A)pull-through system
B)long-term supplier contracts
C)value-added focus
D)total quality control

Question 71

Rudy Company sells a product for $450 per unit. Its market share is 25 percent. The marketing manager feels that the market share can be increased to 33 percent with a reduction in price to $390. The product is currently earning a profit of $72 per unit. The president of Rudy Company feels that the $72 profit per unit must be maintained.

-Refer to the figure.What would be the life-cycle income for Product AA if research and development costs and marketing costs are traced to each product?

A)$3,000
B)$5,000
C)$35,000
D)$100,000

Question 72

What philosophy of quality control does traditional manufacturing use?

A)zero defects
B)total quality control
C)acceptable quality level
D)continuously improving quality

Question 73

When are 90 percent or more of a product's life-cycle costs determined?

A)during the growth stage
B)during the development stage
C)during the decline stage
D)during the maturity stage

Question 74

Which of the following is a trait of a traditional manufacturing system?

A)push-through system
B)value-chain focus
C)total quality control
D)high employee involvement

Question 75

Which of the following is a trait of a JIT system?

A)push-through system
B)significant inventory
C)buyers' market
D)large supplier base

Question 76

Brad Company developed the following budgeted life-cycle income statement for two proposed products. Each product’s life cycle is expected to be two years.
$\begin{array}{llll}&\underline{ \text { Product A}}&\underline{ \text {Product B}}&\underline{ \text {Total}}\\\text { Sales } & \$ 200,000 & \$ 200,000 & \$ 400,000 \\\text { Cost of goods sold } & \underline{120,000} & \underline{130,000} & \underline{250,000} \\\text { Gross profit } & \underline{\$ 80,000 }&\underline{ \$ 70,000} & \$ 150,000\\\text { Period expenses:}\\\text { Research and development}&&&(70,000)\\\text { Marketing}&&&\underline{ (50,000)}\\\text { Life-cycle income }&&&\underline{ \$30,000}\end{array}$ A 10 percent return on sales is required for new products.Because the proposed products did not have a 10 percent return on sales,the products were going to be dropped.
Relative to Product B,Product A requires more research and development costs but fewer resources to market the product.Sixty percent of the research and development costs are traceable to Product A,and 30 percent of the marketing costs are traceable to Product A.

-Refer to the figure.What would be the life-cycle income for Product B if research and development costs and marketing costs are traced to each product?

A)$7,000
B)$12,000
C)$20,000
D)$35,000

Question 77

Rudy Company sells a product for $450 per unit. Its market share is 25 percent. The marketing manager feels that the market share can be increased to 33 percent with a reduction in price to $390. The product is currently earning a profit of $72 per unit. The president of Rudy Company feels that the $72 profit per unit must be maintained.

-Refer to the figure.What is the target price per unit?

A)$318
B)$378
C)$390
D)$450

Question 78

Rudy Company sells a product for $450 per unit. Its market share is 25 percent. The marketing manager feels that the market share can be increased to 33 percent with a reduction in price to $390. The product is currently earning a profit of $72 per unit. The president of Rudy Company feels that the $72 profit per unit must be maintained.

-Refer to the figure.What would the life-cycle income for Product BB be if research and development costs and marketing costs are traced to each product?

A)$70,000
B)$90,000
C)$105,000
D)$150,000

Question 79

Brad Company developed the following budgeted life-cycle income statement for two proposed products. Each product’s life cycle is expected to be two years.
$\begin{array}{llll}&\underline{ \text { Product A}}&\underline{ \text {Product B}}&\underline{ \text {Total}}\\\text { Sales } & \$ 200,000 & \$ 200,000 & \$ 400,000 \\\text { Cost of goods sold } & \underline{120,000} & \underline{130,000} & \underline{250,000} \\\text { Gross profit } & \underline{\$ 80,000 }&\underline{ \$ 70,000} & \$ 150,000\\\text { Period expenses:}\\\text { Research and development}&&&(70,000)\\\text { Marketing}&&&\underline{ (50,000)}\\\text { Life-cycle income }&&&\underline{ \$30,000}\end{array}$ A 10 percent return on sales is required for new products.Because the proposed products did not have a 10 percent return on sales,the products were going to be dropped.
Relative to Product B,Product A requires more research and development costs but fewer resources to market the product.Sixty percent of the research and development costs are traceable to Product A,and 30 percent of the marketing costs are traceable to Product A.

-Refer to the figure.What would be the life-cycle income for Product A if research and development costs and marketing costs are traced to each product?

A)$15,000
B)$23,000
C)$27,000
D)$38,000

Question 80

What is the term for the difference between the sales price needed to capture a predetermined market share and the desired profit per unit?

A)gross profit
B)target cost
C)target price
D)contribution margin