Exam 13: Cost Planning for the Product Life Cycle: Target Costing, Theory of Constraints, and Strategic Pricing

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13). The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: The market price for B-13 and F-32 are reduced to $1,695 and $1,095 respectively. To achieve the target cost, Lens Care plans to reduce materials handling costs. How many parts must be removed from F-32 in order to achieve the target cost for F-32 (round up to whole units)?

Bryan Inc. produces a specialty top-quality juice machine. The product, the JM50, requires four processes to be completed. Specifically, these processes are exterior construction, pulp filter insertion, painting, and packaging. Each process is performed at separate workstations with different completion rates: Exterior construction can manufacture 100,000 juicer exteriors per day. Pulp filter insertion can install 25,000 filters every 6 hours. Painting can decorate 3,000 juicers every half hour. Packaging can package 5,000 juicers per hour. The plant operates 24/7, 24 hours a day every day of the week. What is the least amount of monthly capacity you would have to add to the bottleneck(s) to shift the bottleneck to a different process? (Assume an average 30-day month.)

During the sales life cycle, which is an example of what happens during the introduction phase?

Target cost can be defined as:

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13). The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: The profit margin based on manufacturing cost for model B-13 is:

Cling Co.produces and sells three products (X, Y, and Z).The following data relate to the three products.Labor is a fixed cost. X Y Z Demand in units 190 200 210 Selling price per unit \ 160 \ 190 \ 180 Raw materials costs per unit \ 80 \ 100 \ 110 Labor time in minutes per unit 20 28 12 Required: 1.Which is the most profitable product if there is no labor constraint? 2.Which is the most profitable product if there is a labor constraint?

When comparing Activity-based costing (ABC) and the Theory of Constraints (TOC), the approach each method takes toward profitability analysis is:

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13). The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: The profit margin based on manufacturing cost for model F-32 is:

The sequence of phases in the product or service's life in the market - from the introduction of the product or service to the growth in sales and finally maturity, decline, and withdrawal from the market is the:

Baldwin produces bicycles in a highly competitive market. During the past year, the company has added a 20% markup on the $300 manufacturing cost for one of its most popular models. A new competitor recently entered the market with a competitive model that is priced at $320, seriously eroding Baldwin's market share. Management now desires to use a target-costing approach to remain competitive and is willing to accept a 20% return on sales. If target costing is used, which of the following choices correctly denotes (1) Baldwin's selling price and (2) Baldwin's target cost? Selling Price Target Cost A) \ 360 \ 288 B) \ 360 \ 256 C) \ 320 \ 256 D) \ 320 \ 288 $\text { E) None of the above }$

During the sales life cycle, which is an example of what happens during the growth phase?

The theory of constraints (TOC) emphasizes which of the following?

Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product. Total Costs Variable Manufacturing \ 2,350,000 Variable Selling and Administrative 750,000 Plant-level Fixed Overhead 1,200,000 Fixed Selling and Administrative 600,000 Batch-level Fixed Overhead 200,000 Total Investment in Product Line 10,000,000 Expected Sales (units) 20,000 If Johnson determines price using a desired return on life cycle costs of 30%, the price is:

Bryan Inc. produces a specialty top-quality juice machine. The product, the JM50, requires four processes to be completed. Specifically, these processes are exterior construction, pulp filter insertion, painting, and packaging. Each process is performed at separate workstations with different completion rates: Exterior construction can manufacture 100,000 juicer exteriors per day. Pulp filter insertion can install 25,000 filters every 6 hours. Painting can decorate 3,000 juicers every half hour. Packaging can package 5,000 juicers per hour. The plant operates 24/7, 24 hours a day every day of the week. How many JM50 machines can Bryan Inc. manufacture per month (assume an average 30-day month)?

Which of the following is a method of reducing cost by identifying parts in different products that are common and interchangeable?

Suzy Co. produces and sells three products (X, Y, and Z). The following data relate to the three products: X Y Z Demand in units 160 150 140 Selling price per unit \ 130 \ 160 \ 150 Raw materials costs per unit \ 65 \ 80 \ 90 Labor time in minutes per unit 10 20 10 Which is the most profitable product if there is no constraint on labor time?

Which of the following phases are included in the sales life cycle? Growth Sustainability Decline A) Yes Yes Yes B) Yes Yes No C) Yes No Yes D) No Yes Yes

The sequence of activities within the firm which begins with research and development, followed by design, and manufacturing, marketing/distribution, and customer service is the:

Place the phases of the cost life cycle (value chain) in the correct order from upstream to downstream activities.

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13). The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows:The product cost for model B-13 is: