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

Question 1

The goals of coordinating manufacturing processes,thereby reducing the amount of inventory and improving overall productivity,is particularly important in a:

A)Standard cost system.
B)Just-in-time system.
C)Normal costing system.
D)Activity based costing system.
E)Total quality management system.

Answer 1

B

Question 2

Henry Ford was an early pioneer in the use of:

A)the theory of constraints.
B)target costing.
C)life cycle costing.
D)just-in-time manufacturing.

Answer 2

B

Question 3

Which of the following are computer-based databases that include comprehensive information about the firm's cost drivers?

A)Cost tables.
B)Cost databases.
C)Cost driver tables.
D)Excel tables.

Answer 3

A

Question 4

Concurrent engineering relies on an integrated approach,in which the engineering/design process takes place throughout the cost life cycle using cross-functional teams.Strategically,this concurrent approach should give a firm all of the following except:

A)Flexibility in refining its design.
B)Ability to quickly incorporate customer suggestions.
C)Cost savings because of time saved.
D)More detailed analysis of product functionality.

Question 5

During which stage of the sales life cycle of a product do sales continue to increase but at a decreasing rate,and competition tends to focus on cost?

A)Maturity.
B)Decline.
C)Inflation.
D)Growth.
E)Introduction.

Question 6

Which one of the following is true concerning TOC?

A)A
B)B
C)C
D)D
E)E

Question 7

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:

A)Sales life cycle.
B)Target life cycle.
C)Market life cycle.
D)Critical life cycle.
E)Cost life cycle.

Question 8

The theory of constraints (TOC)approach is strategically important in dynamic markets because it leads to:

A)A more responsive and flexible manufacturing environment.
B)Better customer relationships.
C)Quicker data accessibility.
D)Faster setup times.

Question 9

Generally,firms will price a product more competitively at which stages of the product's sales life cycle?

A)Product introduction and Growth.
B)Maturity and decline.
C)Throughout the cycle.
D)At the end of the life cycle.

Question 10

Activity-based costing (ABC)and the theory of constraints (TOC)are viewed as methods that are:

A)Substitutions for one another.
B)Complementary.
C)Auxiliary.
D)Responsive.
E)Parallel.

Question 11

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

A)Developing competitive constraints.
B)Finding and eliminating design constraints.
C)Removing bottlenecks from the production process.
D)Improving overall production efficiency.

Question 12

Many firms are finding it is difficult to compete successfully on cost leadership or differentiation alone,and they must,in fact,compete on both:

A)Cost and design.
B)Price and functionality.
C)Cost and price.
D)Design and functionality.
E)Cost and functionality.

Question 13

_________________________ is an important first step in value engineering because it identifies critical consumer preferences that will define the product's desired functionality.

A)Consumer analysis
B)Sales force analysis
C)Design analysis
D)R&D analysis
E)Market place analysis

Question 14

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:

A)Sales life cycle.
B)Target life cycle.
C)Market life cycle.
D)Critical life cycle.
E)Cost life cycle.

Question 15

Throughput margin is defined as sales less:

A)Direct labor costs.
B)Direct material costs.
C)Direct labor and material costs.
D)Processing costs.
E)Manufacturing costs.

Question 16

Reduced time-to-market,reduced expected service cost,and ease-of-manufacture are critical success factors at which stage of the cost life cycle?

A)R &
B)Product planning and scheduling.
C)Product design.
D)
D)Manufacturing.

Question 17

When a firm determines the desired cost for a product or service,given a competitive market price,in order to earn a desired profit,the firm is exercising:

A)Target costing.
B)Life cycle costing.
C)Variable costing.
D)Absorption costing.
E)Competitive costing.

Question 18

Many firms choose to achieve target cost through redesign of the product or service because they recognize that design decisions:

A)Are life cycle costs with high downstream costs and benefits.
B)Account for much of the total product life cycle costs.
C)Impact costs at the manufacturing stage of the life cycle.
D)Are critical success factors in most firms.

Question 19

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

A)Target costing.
B)Value chain analysis.
C)Concurrent engineering.
D)Group technology.
E)Theory of constraints.

Question 20

Which one of the following is not one of the five steps in TOC analysis?

A)Identify the binding constraint(s).
B)Determine the most efficient utilization for each binding constraint.
C)Manage the flow through the binding constraint.
D)Identify those responsible for bottlenecks and make adjustments as needed.
E)Redesign the manufacturing process for flexibility and fast throughput.

Question 21

Ken Yalters,the COO of FreshSkin,asked his cost management team for a product line profitability analysis for his firm's two products - Askin and Bskin.The two products are skin care products that require a large amount of research and development and advertising.He received the report below.Ken concluded that Askin was the more profitable product,and that perhaps cost-cutting measures should be applied to the Bskin product.
Seventy-five percent of the research and development and selling expenses were traceable to Askin.
Profit before taxes for the Askin product,per life-cycle income statements,is:

A)$175,000.
B)$425,000.
C)$522,500.
D)$207,500.
E)E)$332,500.

Question 22

Quality Industries manufactures large workbenches for industrial use.Yewell Hartnet,the Vice President for marketing at Quality Industries,concluded from market analysis that sales were dwindling for Standards' workbenches due to aggressive pricing by competitors.Quality's workbench sells for $1,140 whereas the competition's comparable workbench sells for $1,060.Yewell determined that a price drop to $1,060 would be necessary to retain market share and annual sales of 13,000 tables.
Cost data based on sales of 13,000 tables:
The current cost per unit is:

A)$588.
B)$523.
C)$465.
D)$637.
E)$445.

Question 23

To achieve the target cost,Lens Care plans to reduce materials handling costs.How many parts must be removed from B-13 in order to achieve the target cost for B-13 (round up to whole units)?

A)11
B)46
C)34
D)28
E)53

Question 24

Suzy Co.produces and sells three products (X,Y,and Z).The following data relate to the three products:
Which is the most profitable product if there is a constraint on labor time,so that total demand for all products cannot be met?

A)Product X.
B)Product Y.
C)Product Z.
D)More than one of the products has equal total contributions per labor minute.
E)There isn't enough information to answer the question.

Question 25

The management accountant at Iang Manufacturing Co.collected the following data in preparation for a life-cycle analysis on one of its products,a leaf blower:
The stage of the sales life cycle the product is determined to be:

A)Introduction.
B)Growth
C)Maturity.
D)Decline.
E)Withdrawal.

Question 26

The current profit per unit is:

A)$503.
B)$674.
C)$616.
D)$524.
E)$694.

Question 27

Ken Yalters,the COO of FreshSkin,asked his cost management team for a product line profitability analysis for his firm's two products - Askin and Bskin.The two products are skin care products that require a large amount of research and development and advertising.He received the report below.Ken concluded that Askin was the more profitable product,and that perhaps cost-cutting measures should be applied to the Bskin product.
Seventy-five percent of the research and development and selling expenses were traceable to Askin.
Profit before taxes for the Bskin product,per life-cycle income statements,is:

A)$175,000.
B)$425,000.
C)$522,500.
D)$207,500.
E)$332,500.

Question 28

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:
If the market price for B-13 and F-32 are reduced to $1,695 and $1,095 respectively,and Lens Care wants to maintain market share and profitability,what is the target cost for B-13 and F-32 (round to nearest whole dollar)?

A)A
B)B
C)C
D)D
E)E

Question 29

Quality Industries manufactures large workbenches for industrial use.Yewell Hartnet,the Vice President for marketing at Quality Industries,concluded from market analysis that sales were dwindling for Standards' workbenches due to aggressive pricing by competitors.Quality's workbench sells for $1,140 whereas the competition's comparable workbench sells for $1,060.Yewell determined that a price drop to $1,060 would be necessary to retain market share and annual sales of 13,000 tables.
Cost data based on sales of 13,000 tables:
If the profit per unit is maintained,the target cost per unit is:

A)$488.81.
B)$556.54.
C)$515.81.
D)$423.73.
E)E)$345.42.

Question 30

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.
Which function(s)is/are the bottleneck(s)?

A)Exterior construction and pulp filter insertion.
B)Pulp filter insertion.
C)Painting.
D)Packaging.
E)Exterior construction.

Question 31

In order to reduce costs so as to reach the desired target cost,Quality Industries should also focus on reducing the cost of:

A)Direct materials
B)Direct labor
C)Machine setups
D)Mechanical assembly
Materials,labor and setups are all under budget;mechanical assembly is over budget.

Question 32

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 profit margin based on manufacturing cost for model B-13 is:

A)$481.68.
B)$314.69.
C)$239.09.
D)$317.18.
E)$338.16.

Question 33

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:

A)$1,457.82.
B)$1,293.32.
C)$1,159.34.
D)$905.31.
E)$980.91.

Question 34

To achieve the target cost,Lens Care plans to reduce materials handling costs.How many parts must be removed from B-13 in order to achieve the target cost for B-13(round up to whole units)?

A)11
B)46
C)34
D)28
E)53

Question 35

The management accountant at Jang Manufacturing Co.collected the following data in preparation for a life-cycle analysis on one of its products,a leaf blower:
The stage of the sales life cycle the product is in is:

A)Introduction.
B)Growth.
C)Maturity.
D)Decline.
E)Withdrawal.

Question 36

Suzy Co.produces and sells three products (X,Y,and Z).The following data relate to the three products:
Which is the most profitable product if there is no constraint on labor time?

A)Product X.
B)Product Y.
C)Product Z.
D)More than one of the products has equal total contributions per labor minute.
E)There isn't enough information to answer the question.

Question 37

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)?

A)4,320,000 juicers.
B)3,600,000 juicers.
C)3,000,000 juicers.
D)3,200,000 juicers.
Exterior and Pulp filter are the constraints
Exterior: 100,000 x 30 = 3m
Pulp filter: 25,000 x 24/6 x 30 = 3m
Painting: 24/.5 x 3,000 x 30 = 4,320,000
Packaging: 24 x 5,000 x 30 = 3.6m

Question 38

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 profit margin based on manufacturing cost for model F-32 is:

A)$481.68.
B)$314.69.
C)$239.09.
D)$317.18.
E)$338.16.

Question 39

TwoShaft Inc.manufactures a wide variety of parts for recreational boating,including boat engines.The component is purchased by OEM (Original Equipment Manufacturers)such as Mercury and Honda,for use in the larger and more powerful outboards.The units sell for $660,and sales volume averages 32,000 units per year.Recently,TwoShaft's major competitor lowered the price of the equivalent part to $590.The market was very competitive,and TwoShaft realized it had to meet the new price or lose significant market share.The controller assembled the following data for the most recent year:
The target cost for maintaining current market share and profitability is (round to nearest cent):

A)$466.61.
B)$417.12.
C)$396.61.
D)$390.61.
E)$460.61.

Question 40

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 F-32 is:

A)$1,457.82.
B)$1,293.32.
C)$1,159.34.
D)$905.31.
E)$980.91.

Question 41

Electronic Component Company is a producer of high-end video and music equipment.ECC currently sells its top of the line "ECC" DVD player for a price of $250.It costs ECC $210 to make the player.ECC's main competitor is coming to market with a new DVD player that will sell for a price of $220.ECC feels that it must reduce its price to $220 in order to compete.The sales and marketing department of ECC believes the reduced price will cause sales to increase by 15%.ECC currently sells 200,000 DVD players per year.
What is the target cost if target profit is 20% of sales and ECC must meet the competitive price of $220?

A)$168.50.
B)$176.00.
C)$184.25.
D)$190.00.
0)8 x $220 = $176.00

Question 42

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?

A)2,000,001 juicers per month.
B)600,001 juicers per month.
C)1,320,001 juicers per month.
D)50,001 juicers per month.
Exterior: 100,000 x 30 = 3m
Pulp filter: 25,000 x 24/6 x 30 = 3m
Painting: 48 x 3,000 x 30 = 4,320,000
Packaging: 24 x 5,000 x 30 = 3.6m
Add 600,001 to Exterior and to Pulp Filter,would move the constraint to Packaging

Question 43

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

A)Sales and price decline,as do the number of competitors.
B)Sales continue to increase but at a decreasing rate.The number of competitors and product variety decline.
C)Sales increase rapidly along with an increase in product variety.
D)Sales rise slowly as customers become aware of the new product or service.Product variety is limited.

Question 44

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 cost management technique does this case illustrate?

A)Target costing.
B)Theory of constraints.
C)Life-cycle costing.
D)ABC analysis.

Question 45

Quality Chairs Inc.(QC)manufactures chairs for industrial use.Laura Winters,the Vice President for Marketing at QC,concluded from market analysis that sales were dwindling for QC's standard three-foot chair due to aggressive pricing by competitors.QC's chairs sold for $550 whereas the competition's comparable chair was selling for $495.Winters determined that a price drop to $495 would be necessary to regain market share and annual sales of 10,000 chairs.
Cost data based on sales of 10,000 chairs:
The current cost per unit is:

A)$250.
B)$300.
C)$400.
D)$450.
E)$475.

Question 46

Which of the following is a common form of value engineering in which the design team prepares several possible designs of the product,each having similar features with different levels of performance and different costs?

A)Cost analysis.
B)Variable design engineering.
C)Cost-based value engineering.
D)Functional analysis.
E)Design analysis.

Question 47

Place the five steps in implementing a target costing approach in the proper order:
1 - Determine desired profit
2 - Use kaizen costing and operational control to reduce costs
3 - Determine the market price
4 - Use value engineering to identify ways to reduce product costs
5 - Calculate the target cost at market price less desired profit

A)3,2,1,4,5.
B)2,5,4,1,3.
C)4,5,1,3,2.
D)3,1,5,4,2.
E)5,3,2,1,4.

Question 48

Target cost can be defined as:

A)Manufacturing cost - sales price.
B)Competitive price - desired profit.
C)Desired profit - market price.
D)Target price - manufacturing cost.

Question 49

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

A)Sales and price decline,as do the number of competitors.
B)Sales continue to increase but at a decreasing rate.The number of competitors and product variety decline.
C)Sales increase rapidly along with an increase in product variety.
D)Sales rise slowly as customers become aware of the new product or service.Product variety is limited.

Question 50

Quality Chairs Inc.(QC)manufactures chairs for industrial use.Laura Winters,the Vice President for Marketing at QC,concluded from market analysis that sales were dwindling for QC's standard three-foot chair due to aggressive pricing by competitors.QC's chairs sold for $550 whereas the competition's comparable chair was selling for $495.Winters determined that a price drop to $495 would be necessary to regain market share and annual sales of 10,000 chairs.
Cost data based on sales of 10,000 chairs:
If the profit per unit is maintained,the target cost per unit is:

A)$105.
B)$195.
C)$205.
D)$300.
E)$250.

Question 51

Electronic Component Company is a producer of high-end video and music equipment.ECC currently sells its top of the line "ECC" DVD player for a price of $250.It costs ECC $210 to make the player.ECC's main competitor is coming to market with a new DVD player that will sell for a price of $220.ECC feels that it must reduce its price to $220 in order to compete.The sales and marketing department of ECC believes the reduced price will cause sales to increase by 15%.ECC currently sells 200,000 DVD players per year.
Irrespective of the competitor's price,what is EEC's required selling price if the target profit is 25% of sales and current costs cannot be reduced?

A)$280.00.
B)$292.50.
C)$299.00.
D)$308.50.
210/.75 = $280

Question 52

Quality Chairs Inc.(QC)manufactures chairs for industrial use.Laura Winters,the Vice President for Marketing at QC,concluded from market analysis that sales were dwindling for QC's standard three-foot chair due to aggressive pricing by competitors.QC's chairs sold for $550 whereas the competition's comparable chair was selling for $495.Winters determined that a price drop to $495 would be necessary to regain market share and annual sales of 10,000 chairs.
Cost data based on sales of 10,000 chairs:
The current profit per unit is:

A)$250.
B)$300.
C)$400.
D)$450.
E)$475.

Question 53

Electronic Component Company is a producer of high-end video and music equipment.ECC currently sells its top of the line "ECC" DVD player for a price of $250.It costs ECC $210 to make the player.ECC's main competitor is coming to market with a new DVD player that will sell for a price of $220.ECC feels that it must reduce its price to $220 in order to compete.The sales and marketing department of ECC believes the reduced price will cause sales to increase by 15%.ECC currently sells 200,000 DVD players per year.
Assuming sales and marketing are not correct in their estimation and the volume of sales is not changed and ECC meets the competitive price,what is the target cost if ECC wants to maintain its same income level?

A)$210.
B)$200.
C)$190.
D)$180.
$210 - ($250-$220)= $180
Or solve: 200,000x(250-210)= 200,000x(220-X);X = $180

Question 54

Which of the following is the speed at which units must be manufactured to meet customer demand?

A)Production time.
B)Manufacturing time.
C)Takt time.
D)Throughput time.

Question 55

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

A)Sales and price decline,as do the number of competitors.
B)Sales continue to increase but at a decreasing rate.The number of competitors and product variety decline.
C)Sales increase rapidly along with an increase in product variety.
D)Sales rise slowly as customers become aware of the new product or service.Product variety is limited.

Question 56

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

A)Manufacturing,R&D,Design,Customer Service,Marketing & Distribution.
B)Design,R&D,Marketing & Distribution,Manufacturing,Customer Service.
C)Customer Service,Design,R&D,Manufacturing,Marketing & Distribution.
D)R&D,Design,Manufacturing,Marketing & Distribution,Customer Service.
E)Marketing & Distribution,Customer Service,Design,R&D,Manufacturing.

Question 57

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

A)TOC takes a short-term approach and ABC takes a long-term approach.
B)TOC takes a long-term approach and ABC takes a short-term approach.
C)Both TOC and ABC take a short-term approach.
D)Both TOC and ABC take a long-term approach.

Question 58

Which of the following is a common type of value engineering in which the performance and cost of each major function or feature of the product is examined?

A)Cost analysis.
B)Variable design engineering.
C)Cost-based value engineering.
D)Functional analysis.
E)Design analysis.

Question 59

Which of the following phases are included in the sales life cycle?

A)A
B)B
C)C
D)D

Question 60

In order to reduce costs so as to reach the desired target cost,Quality Chairs should also focus on reducing the cost of:

A)Direct materials.
B)Direct labor.
C)Machine setups.
D)Mechanical assembly.
Materials,machine hours and finish/pack are all under budget;labor hours are over budget.

Question 61

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.
If Johnson determines price using a 40% markup of full manufacturing cost,the price is:

A)$262.50
B)$306.00
C)$375.00
D)$364.29
E)$330.00

Question 62

A type of strategic pricing based on analytical methods is used to:

A)Optimally determine the best price.
B)Utilize knowledge of consumer behavior in setting price.
C)More accurately determine life cycle costs as a basis for setting price.
D)Employ improved design methods that reduce cost and improve price.

Question 63

DualShaft Inc.manufactures a wide variety of parts for recreational boating,including boat engines.The component is purchased by OEM (original equipment manufacturers)such as Mercury and Honda,for use in the larger and more powerful outboards.The units sell for $790,and sales volume averages 38,000 units per year.Recently,DualShaft's major competitor lowered the price of the equivalent part to $710.The market was very competitive,and DualShaft realized it had to meet the new price or lose significant market share.The controller assembled the following data for the most recent year.
Cost and Usage for Production of 38,000 Units:

Question 64

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.
If Johnson determines price using a 20% markup of life cycle cost,the price is:

A)$262.50
B)$306.00
C)$375.00
D)$364.29
E)$330.00

Question 65

Precision Instruments,Inc.is a national firm manufacturing a full line of surgical tools for veterinarians.Recent technological developments have produced a significantly higher grade of steel to make surgical instruments and tools.All of Precision's specialized equipment is designed and calibrated to produce surgical tools using current surgical steel stock.Precision's management wants to begin using the new grade of surgical steel,but recognizes the need to redesign and calibrate existing production equipment and/or purchase newly designed production equipment.Redesign of existing equipment can be done in-house,but requires components from the Swedish manufacturer of the equipment.New equipment will also come from Sweden,but its cost is almost double that paid seven years ago for the existing equipment.
Required: Identify the constraints Precision will face as it chooses to upgrade existing equipment or purchase new equipment.There is considerable market pressure to shift to use of the new steel stock for production of surgical tools.

Question 66

Bell Company produces and sells three products (A,B,C).The following data relate to the three products.

Question 67

Pat Baldwin owns and operates Outstanding Quality Rentals (OQR).OQR offers kayak rentals and shuttle service on the Petaholee River.Customers can rent kayaks at one station and enter the river there.They can then exit at one of two designated locations to catch a shuttle to return them to their vehicles.Following are the costs involved in providing this service each year.

Question 68

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.
If Johnson determines price using a desired gross margin percentage of 50%,the price is:

A)$262.50
B)$306.00
C)$375.00
D)$364.29
E)$330.00

Question 69

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.
If Johnson determines price so as to receive a desired return on assets of 15%,the price is:

A)$262.50
B)$306.00
C)$375.00
D)$364.29
E)$330.00

Question 70

Jamestown Furniture Co.is a small,but fast-growing manufacturer of living room furniture.Its two principal products are end tables and sofas.There are five processes in the manufacturing at Jamestown: Cutting the lumber,cutting the fabric,sanding,staining,and assembly.Jamestown has one employee working in fabric cutting and one employee working in staining.These are relatively skilled workers,and could be replaced only with some difficulty.The cutting and sanding operations are performed by two workers each,and while there is some skill to these operations,it is less critical than for staining and for fabric cutting.Assembly is the least skill-based process,and is currently done by one full-time employee and a group of part-timers who provide a total of 175 minutes of working time per week.The other employees work a 40-hour week,with 5 hours off for breaks,training,and personal time.Assume a four week month,and that by prior agreement,any of the employees can be switched from one task to another.The current demand for Jamestown's products and sales prices are provided below.Jamestown expects demand to increase significantly in the coming months (this depends on whether it is able to successfully obtain the order it is negotiating to get from a motel chain).The materials cost for the table is $150 and $275 for the sofa.

Question 71

PharmCo Manufacturing operates a contract manufacturing plant in London,England.The plant produces a variety of pharmaceutical drugs for companies around the world.Cycle time is a critical success factor for PharmCo,which has developed a number of measures of manufacturing speed.The company has studied the matter and found that competitive contract manufacturers have manufacturing cycle efficiency (MCE)time of about 40 percent.When last measured,PharmCo's MCE was 35 percent.At PharmCo,cycle time is defined as beginning at the point when the order taking is complete.
Some key measures from the most recent month's production,averaged over all the jobs during the period,are as follows:

Question 72

Cling Co.produces and sells three products (X,Y,and Z).The following data relate to the three products.Labor is a fixed cost.

Question 73

PureSwing Golf,Inc.manufactures swing analyzer systems for golf instructors.Two of its systems,Pure1000 and the Pure5000 have these characteristics:

Question 74

Excel Manufacturing has received an order for 5,000 units of its only product,Excel-A.Excel is considering a variety of methods to determine the price of the order.Some key information about Excel follows:

Question 75

AirTravel Inc.manufactures a wide variety of parts for commercial aircraft,including airplane engines.The component is purchased by OEM (original equipment manufacturers)such as Boeing,for use in the larger and more powerful outboards.The units sell for $10,000,and sales volume averages 2,000 units per year.Recently,AirTravel's major competitor lowered the price of the equivalent part to $9,500.The market was very competitive,and AirTravel realized it had to meet the new price or lose significant market share.The controller assembled the following data for the most recent year:
Cost and Usage for Production of 2,000 Units:

Question 76

Warrenton Industries manufactures hydraulic components for large automated machine tools.Myles English,the Vice President for Marketing,has concluded from his market analysis that sales are dwindling for one of the firm's products main products,a hydraulic valve,because of aggressive pricing by competitors.Warrenton's product sells for $525 whereas the competition's comparable part is selling in the $425 range.Mr.English has determined that a price drop to $400 is necessary to regain market share and annual sales of 1,000 units.
Cost data based on sales of 1,000 valves:

Question 77

Gail Johnston is the CFO of Lancet Technologies,a manufacturer of parts and supplies for the cable TV industry.Gail has developed an analysis of the profitability of the firm's two main product lines,cable hardware,and cable supplies.Based on the analysis,she concludes that cable hardware is the most profitable of the firm's product lines.

Question 78

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.
If Johnson determines price using a desired return on life cycle costs of 30%,the price is:

A)$262.50
B)$306.00
C)$375.00
D)$364.29
E)$330.00

Question 79

Amanda Jones owns and operates Motorcycle Rentals Inc.(MRI).Customers can rent a motorcycle in one city and then return it at one of three designated cities.Following are the costs involved in providing this service each year:

Question 80

The management accountant at the Huang Manufacturing Company has collected the following data in preparation for a life cycle analysis on one of its products,a leaf blower: