Exam 7: Target Costing, Managing Activities and Managing Capacity

Answer the following questions using the information below: Elliott Manufacturing has decided to produce a new interior door to complement its exterior door line.The new door is expected to sell for $60 each,and the annual target sales volume for the doors is 20 000.Elliott has target operating profit of 20% of sales. -What is the target cost?

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(Multiple Choice)

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Question 1

Correct Answer:

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What is the primary reason a firm would adopt target costing? _ _

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(Essay)

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Question 2

Correct Answer:

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The primary reason a firm would adopt target costing is to reduce costs so that target profit and sales are achieved.Its unique approach is to design costs out of products during the design stage in the product life cycle.Many firms are adopting this approach when they cannot reduce costs further using traditional costing methods,which focus on cost reductions in manufacturing.

Answer the following questions using the information below: Perth TV currently sells flat screen televisions for $180.It has costs of $140.A competitor is bringing a new flat screen television to market that will sell for $150.Perth believes it must lower the price of its television sets to $150 to remain competitive.Marketing believes that the new price will cause sales to increase by 10%,even with the new competitor in the market.Perth's sales are currently 100 000 televisions per year. -What is the target cost if target operating profit is 25% of sales?

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Question 3

Correct Answer:

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For manufacturing firms,product costs are generally locked in during the manufacturing stage.

(True/False)

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Question 4

In ________ budgeting,managers estimate the revenues and business function costs of the value chain attributable to each product from its initial R&D to its final customer service and support.

(Multiple Choice)

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Question 5

Mt Safety Avionics currently sells radios for $1800 each.Each radio costs $1400 to make.A competitor is introducing a new radio that will sell for $1600.Mt Safety believes it must lower the price to $1600 to compete in the market for radios.However,its Marketing Department believes that the new price will cause sales to increase by 10%,even with a new competitor in the market.Mt Safety's sales are currently 1000 radios per year. Required: a.What is the target cost if target operating profit is 25% of sales? b.What is the change in operating profit if marketing is correct and only the sales price is changed? c.What is the target cost if the company wants to maintain its same profit level,and marketing is correct? _ _

(Essay)

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Question 6

Place the following steps for the implementation of target costing in order: A = Derive a target cost B = Develop a target price C = Perform value engineering D = Determine target operating profit

(Multiple Choice)

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Question 7

Value engineering may result in all of the following EXCEPT:

(Multiple Choice)

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Question 8

We describe an activity as a value-added activity if its elimination by a manager would reduce the perceived value or utility (usefulness)that customers experience from using the relevant output.

(True/False)

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Question 9

When significant differences exist between practical capacity and budgeted capacity utilisation,companies may:

(Multiple Choice)

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Question 10

Answer the following questions using the information below: Potter Products has produced an electric coffee pot to complement its range of kitchen products.The new coffee pot can be sold at a target price of $46,and annual target sales volume for the coffee pot is 250 000.Potter has target operating profit of 20% of sales. -What is the total target cost?

(Multiple Choice)

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Question 11

________ analysis is a fundamental tool in value engineering.

(Multiple Choice)

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Question 12

Which of the following focuses on reducing costs during the manufacturing stage?

(Multiple Choice)

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Question 13

Answer the following questions using the information below: Perth TV currently sells flat screen televisions for $180.It has costs of $140.A competitor is bringing a new flat screen television to market that will sell for $150.Perth believes it must lower the price of its television sets to $150 to remain competitive.Marketing believes that the new price will cause sales to increase by 10%,even with the new competitor in the market.Perth's sales are currently 100 000 televisions per year. -What is the change in operating profit if marketing is correct and only the sales price is changed?

(Multiple Choice)

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Question 14

Answer the following questions using the information below: Potter Products has produced an electric coffee pot to complement its range of kitchen products.The new coffee pot can be sold at a target price of $46,and annual target sales volume for the coffee pot is 250 000.Potter has target operating profit of 20% of sales. -What are the target sales revenues?

(Multiple Choice)

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Question 15

Capacity costs also arise in non-production parts of the value chain.

(True/False)

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Question 16

From the perspective of long-run product costing,which of the following is the best to use?

(Multiple Choice)

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Question 17

The first step in target pricing is to determine the target cost of the product.

(True/False)

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Question 18

Answer the following questions using the information below: Cycle Safety company is able to produce 1000 safety helmets per hour,at maximum efficiency.There are three eight-hour shifts each day.Due to unavoidable operating interruptions,production averages 850 units per hour.The plant actually operates only 27 days per month. -What is the practical capacity for the month of April?

(Multiple Choice)

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Question 19

Normal capacity utilisation is the expected level of capacity utilisation for the current budget period,which is typically one year.

(True/False)

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Question 20

Showing 1 - 20 of 155

What is the primary reason a firm would adopt target costing? _ _

For manufacturing firms,product costs are generally locked in during the manufacturing stage.

In ________ budgeting,managers estimate the revenues and business function costs of the value chain attributable to each product from its initial R&D to its final customer service and support.

Place the following steps for the implementation of target costing in order: A = Derive a target cost B = Develop a target price C = Perform value engineering D = Determine target operating profit

Value engineering may result in all of the following EXCEPT:

We describe an activity as a value-added activity if its elimination by a manager would reduce the perceived value or utility (usefulness)that customers experience from using the relevant output.

When significant differences exist between practical capacity and budgeted capacity utilisation,companies may:

________ analysis is a fundamental tool in value engineering.

Which of the following focuses on reducing costs during the manufacturing stage?

Capacity costs also arise in non-production parts of the value chain.

From the perspective of long-run product costing,which of the following is the best to use?

The first step in target pricing is to determine the target cost of the product.

Normal capacity utilisation is the expected level of capacity utilisation for the current budget period,which is typically one year.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters

Exam 7: Target Costing, Managing Activities and Managing Capacity

What is the primary reason a firm would adopt target costing? _____________________________________________________________________________________________ _____________________________________________________________________________________________

For manufacturing firms,product costs are generally locked in during the manufacturing stage.

In ________ budgeting,managers estimate the revenues and business function costs of the value chain attributable to each product from its initial R&D to its final customer service and support.

Place the following steps for the implementation of target costing in order: A = Derive a target cost B = Develop a target price C = Perform value engineering D = Determine target operating profit

Value engineering may result in all of the following EXCEPT:

We describe an activity as a value-added activity if its elimination by a manager would reduce the perceived value or utility (usefulness)that customers experience from using the relevant output.

When significant differences exist between practical capacity and budgeted capacity utilisation,companies may:

________ analysis is a fundamental tool in value engineering.

Which of the following focuses on reducing costs during the manufacturing stage?

Capacity costs also arise in non-production parts of the value chain.

From the perspective of long-run product costing,which of the following is the best to use?

The first step in target pricing is to determine the target cost of the product.

Normal capacity utilisation is the expected level of capacity utilisation for the current budget period,which is typically one year.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters

What is the primary reason a firm would adopt target costing? _ _