Question 1

Before abandoning a customer who seems unprofitable in the short run, management must keep in mind that:

Accepted Answer

A)  The customer may be a member of a value-based segment. 
B)  Not all costs assigned to an abandoned customer may be avoided, and revenue could be lost with little or no cost savings. 
C)  The customer's value proposition may be a poor match to the firm's value creation profile. 
D)  The customer possesses significant market power. 
A)  The customer may be a member of a value-based segment. 
B)  Not all costs assigned to an abandoned customer may be avoided, and revenue could be lost with little or no cost savings. 
C)  The customer's value proposition may be a poor match to the firm's value creation profile. 
D)  The customer possesses significant market power.

Question 2

Southwest Airlines competes with American Airlines, Delta, and other legacy carriers by offering lower prices, greater convenience, on-time arrival, and friendly service. These items constitute Southwest's:

Accepted Answer

A)  Customer value proposition. 
B)  Value-added costs. 
C)  Sources of leverage. 
D)  All of the above. 
A)  Customer value proposition. 
B)  Value-added costs. 
C)  Sources of leverage. 
D)  All of the above.

Question 3

Use the following information to determine which customer is more profitable to service. Calculate both total profit and profit as a percentage of revenue for each customer.

Accepted Answer

Use the following information

Question 4

Delta and Southwest Airlines compete for passengers on the route between Albany, N.Y., and Atlanta, Ga. Delta offers nonstop service while all of Southwest's flights stop in Baltimore, Md., and require a change of plane. Delta's nonstop flights constitute:

Accepted Answer

A)  A value attribute. 
B)  A source of leverage. 
C)  Waste. 
D)  A business-value-added activity. 
A)  A value attribute. 
B)  A source of leverage. 
C)  Waste. 
D)  A business-value-added activity.

Question 5

When renting an automobile, members of Hertz Gold Club can proceed directly to a car of their choice, thereby avoiding spending time waiting on line and carrying out the transaction at a service counter. The Hertz Gold Club customer who knowingly pays a price premium for this service would view it as a:

Accepted Answer

A)  Non-value-added cost. 
B)  Value attribute. 
C)  Business-value-added cost. 
D)  Customer value proposition. 
A)  Non-value-added cost. 
B)  Value attribute. 
C)  Business-value-added cost. 
D)  Customer value proposition.

Question 6

Suburban Systems, Inc., sells and services residential and commercial central heating and air conditioning systems. The company has decided to improve its financial performance by raising prices for customers who demand extraordinary amounts of post-sale service support. This tactic would be consistent with which method of increasing profitability per customer?

Accepted Answer

A)  Acquiring new customers of the right type. 
B)  Enhancing the profitability of existing customers. 
C)  Improving retention of desirable customers. 
D)  None of the above. 
A)  Acquiring new customers of the right type. 
B)  Enhancing the profitability of existing customers. 
C)  Improving retention of desirable customers. 
D)  None of the above.

Question 7

One of the goals of variance analysis in the customer domain is to:

Accepted Answer

A)  Identify ideal customers. 
B)  Disaggregate the company's overall profit variance by customer. 
C)  Improve customer retention. 
D)  Attract new customers of the right type. 
A)  Identify ideal customers. 
B)  Disaggregate the company's overall profit variance by customer. 
C)  Improve customer retention. 
D)  Attract new customers of the right type.

Question 8

A "passive customer" is relatively insensitive to price changes.

Accepted Answer

A) True 
 B)False

Question 9

When performing a customer profit variance analysis, changing the assumption about a customer's overall volume of purchases to the actual amount, but leaving all other items at their planned level, will produce the customer market share variance.

Accepted Answer

A) True 
 B)False

Question 10

Analyses of customer profitability typically reveal that:

Accepted Answer

A)  As few as 20% of customers yield 80% of a firm's total profits. 
B)  Most customers yield equal shares of a firm's total profits. 
C)  There is rarely an economic case to be made for abandoning a customer. 
D)  The largest customers as measured by revenue are the most profitable. 
A)  As few as 20% of customers yield 80% of a firm's total profits. 
B)  Most customers yield equal shares of a firm's total profits. 
C)  There is rarely an economic case to be made for abandoning a customer. 
D)  The largest customers as measured by revenue are the most profitable.

Question 11

A favorable customer market share variance and unfavorable price variance would be entirely consistent outcomes.

Accepted Answer

A) True 
 B)False

Question 12

The costs associated with non-value-added activities, such as rework, reduce profit because:

Accepted Answer

A)  Such activities are typically performed for unprofitable customers. 
B)  Such activities are only undertaken because they are necessary for the firm to remain in business. 
C)  Such activities are not valued by the customer and produce no revenue. 
D)  Such activities are part of the customer value proposition. 
A)  Such activities are typically performed for unprofitable customers. 
B)  Such activities are only undertaken because they are necessary for the firm to remain in business. 
C)  Such activities are not valued by the customer and produce no revenue. 
D)  Such activities are part of the customer value proposition.

Question 13

Endeavour Company is Morse Products' largest customer. A variance analysis of customer profitability prepared by Morse for Endeavour Company revealed a favorable customer purchase volume variance and an unfavorable market share variance. This means that:

Accepted Answer

A)  Endeavour purchased less than Morse planned. 
B)  Morse increased its share of Endeavour's business but Endeavour's total purchases declined. 
C)  Endeavour's purchases of the products sold by Morse exceeded the amount budgeted by Morse, but a smaller fraction of those purchases than expected were from Morse. 
D)  Endeavour Company had a positive impact on Morse's profitability for the period analyzed. 
A)  Endeavour purchased less than Morse planned. 
B)  Morse increased its share of Endeavour's business but Endeavour's total purchases declined. 
C)  Endeavour's purchases of the products sold by Morse exceeded the amount budgeted by Morse, but a smaller fraction of those purchases than expected were from Morse. 
D)  Endeavour Company had a positive impact on Morse's profitability for the period analyzed.

Question 14

Customers who: 1) satisfy all of their needs for products sold by the firm from the firm; 2) pay the full price needed to maintain desired profit margins; and 3) demand no special services are best described as:

Accepted Answer

A)  Ideal. 
B)  Lifetime. 
C)  Predatory. 
D)  Bargain basement. 
A)  Ideal. 
B)  Lifetime. 
C)  Predatory. 
D)  Bargain basement.

Question 15

If a particular customer requires an unusually large amount of attention from your company's sales staff, it will be brought to your management's attention by:

Accepted Answer

A)  An unfavorable purchase volume variance. 
B)  An unfavorable market share variance. 
C)  An unfavorable price variance. 
D)  An unfavorable cost spending variance. 
A)  An unfavorable purchase volume variance. 
B)  An unfavorable market share variance. 
C)  An unfavorable price variance. 
D)  An unfavorable cost spending variance.

Question 16

Of the following types of customers, which would probably require the largest cost to service?

Accepted Answer

A)  Wealthy demanding. 
B)  Passive. 
C)  Bargain basement. 
D)  Profitable. 
A)  Wealthy demanding. 
B)  Passive. 
C)  Bargain basement. 
D)  Profitable.

Question 17

It is entirely possible that a customer who is profitable at the gross margin level may prove to be unprofitable when all costs associated with making and supporting sales are considered.

Accepted Answer

A) True 
 B)False

Question 18

A company trying to penetrate new markets is likely to refrain from assigning some of its selling, general, and administrative costs to specific customers.

Accepted Answer

A) True 
 B)False

Question 19

Joe, who is 6-feet and 6-inches tall, gladly pays an extra $100 for an airline seat that offers eight inches of additional legroom. For Joe, the extra legroom is a value attribute.

Accepted Answer

A) True 
 B)False

Question 20

The cost associated with preparing, issuing, and collecting customer invoices is an example of:

Accepted Answer

A)  A value-added activity and cost. 
B)  Business-value-added activity and cost. 
C)  Non-value-added activity and cost. 
D)  Waste. 
A)  A value-added activity and cost. 
B)  Business-value-added activity and cost. 
C)  Non-value-added activity and cost. 
D)  Waste.

Before abandoning a customer who seems unprofitable in the short run, management must keep in mind that:

Southwest Airlines competes with American Airlines, Delta, and other legacy carriers by offering lower prices, greater convenience, on-time arrival, and friendly service. These items constitute Southwest's:

Use the following information to determine which customer is more profitable to service. Calculate both total profit and profit as a percentage of revenue for each customer.

Delta and Southwest Airlines compete for passengers on the route between Albany, N.Y., and Atlanta, Ga. Delta offers nonstop service while all of Southwest's flights stop in Baltimore, Md., and require a change of plane. Delta's nonstop flights constitute:

One of the goals of variance analysis in the customer domain is to:

A "passive customer" is relatively insensitive to price changes.

When performing a customer profit variance analysis, changing the assumption about a customer's overall volume of purchases to the actual amount, but leaving all other items at their planned level, will produce the customer market share variance.

Analyses of customer profitability typically reveal that:

A favorable customer market share variance and unfavorable price variance would be entirely consistent outcomes.

The costs associated with non-value-added activities, such as rework, reduce profit because:

Endeavour Company is Morse Products' largest customer. A variance analysis of customer profitability prepared by Morse for Endeavour Company revealed a favorable customer purchase volume variance and an unfavorable market share variance. This means that:

Customers who: 1) satisfy all of their needs for products sold by the firm from the firm; 2) pay the full price needed to maintain desired profit margins; and 3) demand no special services are best described as:

If a particular customer requires an unusually large amount of attention from your company's sales staff, it will be brought to your management's attention by:

Of the following types of customers, which would probably require the largest cost to service?

It is entirely possible that a customer who is profitable at the gross margin level may prove to be unprofitable when all costs associated with making and supporting sales are considered.

A company trying to penetrate new markets is likely to refrain from assigning some of its selling, general, and administrative costs to specific customers.

Joe, who is 6-feet and 6-inches tall, gladly pays an extra $100 for an airline seat that offers eight inches of additional legroom. For Joe, the extra legroom is a value attribute.

The cost associated with preparing, issuing, and collecting customer invoices is an example of:

Business Planning and Analysis: An Integrative Framework for Management Accounting

Measuring and Evaluating Performance

Defining and Using Cost Estimates

Cost Pools, Capacity, and Activity- Based Costing

Understanding the Management Process

Planning in the Product Domain

Assessing and Improving Product Profitability

Setting Process Expectations

Evaluating and Improving Process Performance

Setting Performance Expectations at the Entity Level

Setting Performance Expectations in Large, Complex Organizations

Evaluating and Improving Entity Performance

Strategic Cost Management and the Value Chain Domain

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Exam 13: Setting and Achieving Targets in the Customer Domain

Before abandoning a customer who seems unprofitable in the short run, management must keep in mind that:

Southwest Airlines competes with American Airlines, Delta, and other legacy carriers by offering lower prices, greater convenience, on-time arrival, and friendly service. These items constitute Southwest's:

Use the following information to determine which customer is more profitable to service. Calculate both total profit and profit as a percentage of revenue for each customer.

Delta and Southwest Airlines compete for passengers on the route between Albany, N.Y., and Atlanta, Ga. Delta offers nonstop service while all of Southwest's flights stop in Baltimore, Md., and require a change of plane. Delta's nonstop flights constitute:

One of the goals of variance analysis in the customer domain is to:

A "passive customer" is relatively insensitive to price changes.

When performing a customer profit variance analysis, changing the assumption about a customer's overall volume of purchases to the actual amount, but leaving all other items at their planned level, will produce the customer market share variance.

Analyses of customer profitability typically reveal that:

A favorable customer market share variance and unfavorable price variance would be entirely consistent outcomes.

The costs associated with non-value-added activities, such as rework, reduce profit because:

Endeavour Company is Morse Products' largest customer. A variance analysis of customer profitability prepared by Morse for Endeavour Company revealed a favorable customer purchase volume variance and an unfavorable market share variance. This means that:

Customers who: 1) satisfy all of their needs for products sold by the firm from the firm; 2) pay the full price needed to maintain desired profit margins; and 3) demand no special services are best described as:

If a particular customer requires an unusually large amount of attention from your company's sales staff, it will be brought to your management's attention by:

Of the following types of customers, which would probably require the largest cost to service?

It is entirely possible that a customer who is profitable at the gross margin level may prove to be unprofitable when all costs associated with making and supporting sales are considered.

A company trying to penetrate new markets is likely to refrain from assigning some of its selling, general, and administrative costs to specific customers.

Joe, who is 6-feet and 6-inches tall, gladly pays an extra $100 for an airline seat that offers eight inches of additional legroom. For Joe, the extra legroom is a value attribute.

The cost associated with preparing, issuing, and collecting customer invoices is an example of:

Business Planning and Analysis: An Integrative Framework for Management Accounting

Measuring and Evaluating Performance

Defining and Using Cost Estimates

Cost Pools, Capacity, and Activity- Based Costing

Understanding the Management Process

Planning in the Product Domain

Assessing and Improving Product Profitability

Setting Process Expectations

Evaluating and Improving Process Performance

Setting Performance Expectations at the Entity Level

Setting Performance Expectations in Large, Complex Organizations

Evaluating and Improving Entity Performance

Strategic Cost Management and the Value Chain Domain

Filters