Deck 13: Strategy, Balanced Scorecard, and Profitability Analysis

Question 1

________ has/have been classified in many ways, but what is common is to set the business within its external environment.

A)Strategies
B)Planning
C)Competitors
D)Bargaining power of input suppliers
E)Cost Leadership

Answer 1

A

Question 2

Answer the following questions using the information below:
Stewart Corporation plans to grow by offering a sound system, the SS3000, that is superior and unique from the competition.Stewart believes that putting additional resources into R&D and staying ahead of the competition with technological innovations is critical to implementing its strategy.
Stewart's strategy is

A)product differentiation.
B)downsizing.
C)reengineering.
D)cost leadership.
E)salability.

Answer 2

A

Question 3

Which of the following is NOT a force that shapes an organization's competitive environment?

A)competitors
B)equivalent products
C)bargaining power of customers
D)government regulation
E)potential entrants into the market

Answer 3

D

Question 4

According to Michael Porter which of the following is a force that shapes an organization's competitive environment?

A)investors
B)potential entrants into the market
C)lenders
D)research and development
E)bankers

Question 5

Strategies have been classified in many different ways, but what is common is to set the business within its external environment.

Question 6

In general, profit potential increases with greater competition, stronger potential entrants, products that are similar, and tougher customers and suppliers.

Question 7

An organization that is using the cost leadership approach would

A)incur costs for innovative R&D.
B)provide products at a higher price but with lower costs than its competitors.
C)focus on productivity through efficiency improvements.
D)bring products to market rapidly.
E)use a cost plus rather than a target pricing policy.

Question 8

Strategy requires integration of product and process development.

Question 9

Identify and explain Porter's Five Forces model.

Question 10

Reengineering benefits are most significant when they focus on one business function rather than crossing functional lines of the business process.

Question 11

Bosely Corporation is reviewing its business strategy.The first step for Bosely is to evaluate the competitive environment.You have been hired to help the company go through the strategy formulation process.Required:
To perform the analysis of competitive rivalry, what areas should Bosely focus on and give at least one example of how Bosely can effectively deal with each area.

Question 12

Explain the product differentiation and the cost leadership strategies.

Question 13

Reengineering is the fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance such as cost, quality, service, speed, and customer satisfaction.

Question 14

Cost leadership is an organization's ability to offer products or services that are perceived by its own customers as being superior and unique relative to those of its competitors.

Question 15

________ is an organization's ability to offer products or services that are perceived by its customers as being superior and unique relative to those of its competitors.

A)Strategy
B)Product differentiation
C)Cost leadership
D)The balanced scorecard
E)Cost differentiation

Question 16

To achieve a cost leadership strategy companies may need to improve their internal production processes to increase yield.

Question 17

Successful reengineering efforts generally involve changing the roles and responsibilities of employees.

Question 18

________ is an organization's ability to achieve low costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control.

A)Strategy
B)Product differentiation
C)Cost leadership
D)The balanced scorecard
E)Product leadership

Question 19

An organization that is using the product differentiation approach would

A)focus on tight cost control.
B)carefully cultivate its brands.
C)provide products that are similar to competitors.
D)invest more in productivity enhancements than R&D.
E)recognize that demand is more price sensitive than if using a cost leadership approach.

Question 20

________ is the fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance such as cost, quality, service, speed, and customer satisfaction.

A)Strategy
B)Customer perspective
C)Learning and growth perspective
D)Reengineering
E)Product differentiation

Question 21

Successful reengineering involves all of the following EXCEPT

A)cutting across functional lines to focus on the entire business process.
B)redefining the roles and responsibilities of employees.
C)using information technology.
D)entering new geographic markets.
E)improving customer satisfaction.

Question 22

What is reengineering? Can you contrast a reengineering approach to change with a Kaizen approach to change?

Question 23

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
Referring to Luke Company, which of the following is an objective of the learning and growth perspective?

A)increase return on investment
B)increase market share in the high-end appliance market
C)improve order delivery time
D)development of new products or services
E)increase customer satisfaction

Question 24

The number of complaints about the company's product is a potential measure of the

A)financial perspective.
B)shareholder value.
C)internal business process.
D)learning and growth perspective.
E)customer perspective.

Question 25

Use the information below to answer the following question(s).Following a strategy of product differentiation, Barry Company makes an XX 300.Barry Company presents the following data for the years 1 and 2. Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Barry Company has 23 customers in year 1 and 25 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
Referring to Barry Company, which of the following is a measure of the customer perspective?

A)operating income growth from charging higher margins for XX 300
B)yield
C)production cycle time
D)improving manufacturing processes
E)customer satisfaction rating

Question 26

Use the information below to answer the following question(s).Following a strategy of product differentiation, Barry Company makes an XX 300.Barry Company presents the following data for the years 1 and 2. Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Barry Company has 23 customers in year 1 and 25 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
Referring to Barry Company, which of the following is a measure of the learning and growth perspective?

A)operating income growth from charging higher margins for XX 300
B)market share in the high-end appliance market
C)order delivery time
D)number of employees trained in quality management
E)customer satisfaction

Question 27

________ translates an organization's mission and strategy into a comprehensive set of performance measures that provides the framework for implementing its strategy.

A)Corporate vision
B)Product differentiation
C)Cost leadership
D)The balanced scorecard
E)Planning

Question 28

Learning and growth perspective identifies the capabilities in which the organization must excel to achieve superior internal processes that create value for customers and shareholders.

Question 29

Use the information below to answer the following question(s).Following a strategy of product differentiation, Barry Company makes an XX 300.Barry Company presents the following data for the years 1 and 2. Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Barry Company has 23 customers in year 1 and 25 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
Referring to Barry Company, which of the following is a measure of the financial perspective?

A)order delivery time
B)reengineering
C)operating income growth from charging higher margins for XX 300
D)improving manufacturing processes
E)market share in the high-end appliance market

Question 30

Surveys of employee satisfaction is a potential measure of the

A)financial perspective.
B)customer perspective.
C)internal business process perspective.
D)learning and growth perspective.
E)shareholder value.

Question 31

When implementing a balanced scorecard, one should assume the cause-and-effect linkage to be precise.

Question 32

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
Referring to Luke Company, which of the following is a measure of the financial perspective?

A)reengineering process
B)market share in the high-end appliance market
C)order delivery time
D)production cycle time
E)operating income growth from changing higher margins

Question 33

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
Referring to Luke Company, which of the following is a measure of the customer perspective?

A)return on investment
B)market share in the high-end appliance market
C)development of new products or services
D)production cycle time
E)revenue growth

Question 34

The accounting scorecard translates an organization's mission and strategy into a comprehensive set of performance measures that provides the framework for implementing its strategy.

Question 35

Employee satisfaction is a measure of the internal business process perspective of the balanced scorecard.

Question 36

Manufacturing cycle efficiency is a potential measure of the

A)financial perspective.
B)customer perspective.
C)internal business process perspective.
D)learning and growth perspective.
E)real-time feedback capacity.

Question 37

The return-on-investment ratio is an example of a scorecard measure under the

A)internal business process.
B)customer perspective.
C)financial perspective.
D)learning and growth perspective.
E)manufacturing perspective.

Question 38

The internal business process perspective focuses on internal operations that further both the customer perspective by creating value for customers and the financial perspective by increasing shareholder wealth.

Question 39

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
Referring to Luke Company, which of the following is a measure of the internal business process perspective?

A)return on investment
B)market share in the high-end appliance market
C)timely delivery
D)production cycle time
E)number of employees trained in quality management

Question 40

Use the information below to answer the following question(s).Following a strategy of product differentiation, Barry Company makes an XX 300.Barry Company presents the following data for the years 1 and 2. Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Barry Company has 23 customers in year 1 and 25 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
Referring to Barry Company, which of the following is a measure of the internal business process perspective?

A)operating income growth from charging higher margins for XX 300
B)market share in the high-end appliance market
C)production cycle time
D)number of employees trained in quality management
E)real-time customer feedback

Question 41

Buck Corporation plans to grow by offering a computer monitor, the CM3000 that is superior and unique from the competition.Buck believes that putting additional resources into R&D and staying ahead of the competition with technological innovations are critical to implementing its strategy.Required:
a.Is Buck's strategy one of product differentiation or cost leadership? Explain briefly.
b.Identify at least one key measure for each balanced scorecard perspective.

Question 42

What is the primary purpose of the balanced scorecard?

Question 43

Measures of the balanced scorecard's customer perspective include all of the following EXCEPT

A)market share.
B)customer satisfaction.
C)number of new customers.
D)employee training on new products.
E)number of repeat customers.

Question 44

To evaluate the success of its strategy, a company can subdivide the change in costs into growth, price-recovery and productivity components.

Question 45

The purpose of the balanced scorecard is BEST described as helping an organization

A)develop customer relations.
B)mobilize employee skills for continuous improvements in processing capabilities, quality, and response times.
C)introduce innovative products and services desired by target customers.
D)translate an organization's mission and strategy into a set of performance measures that help to implement the strategy.
E)develop supplier relations.

Question 46

Which of the following is NOT true of a good balanced scorecard?

A)It tells the story of a company's strategy by articulating a sequence of cause-and-effect relationships.
B)It helps to communicate corporate strategy to all members of the organization.
C)It identifies all measures, whether significant or small, that help to implement strategy.
D)It uses nonfinancial measures to serve as leading indicators of future financial performance.
E)It incorporates both financial and nonfinancial measures.

Question 47

Maloney Corporation manufactures plastic water bottles.It plans to grow by producing high-quality water bottles at a low cost that are delivered in a timely manner.There are a number of other manufacturers who produce similar water bottles.Maloney believes that continuously improving its manufacturing processes and having satisfied employees are critical to implementing its strategy.Required:
a.Is Maloney's strategy one of product differentiation or cost leadership? Explain briefly.
b.Identify at least one key measure for each balanced scorecard perspective.

Question 48

Which of the following is a feature of a good balanced scorecard?

A)It tells the story of a company's strategy by articulating costs along the value chain.
B)It helps to communicate the strategy to all members of the organization by translating the strategy into a coherent and linked set of understandable and measurable operational targets.
C)The scorecard measures match those of other companies.
D)It provides cause-and-effect linkages that are precise.
E)The scorecard contains dozens of different measures across many different categories.

Question 49

Answer the following questions using the information below:
Riter Corporation manufactures water toys.It plans to grow by producing high-quality water toys at a low cost that are delivered in a timely manner.There are a number of other manufacturers who produce similar water toys.Riter believes that continuously improving its manufacturing processes are critical to implementing its strategy.
To execute the company strategy, measures on the balanced scorecard would most likely include the

A)number of process improvements.
B)price premium earned.
C)market share.
D)the amount invested in new product features.
E)employee satisfaction.

Question 50

Companies that have been successful at cost leadership will show large favorable price-recovery and growth components when analyzing profitability.

Question 51

Measures of the balanced scorecard's internal business process perspective include all of the following EXCEPT

A)operating capabilities.
B)number of new products.
C)employee turnover rates.
D)defect rates.
E)production cycle time.

Question 52

The price-recovery component of a change in operating income measures the effect of price changes on revenues and costs.

Question 53

The productivity component of operating income focuses exclusively on revenues.

Question 54

The price-recovery component of a change in operating income from one year to the next measures the increase in operating income from selling more units of the product.

Question 55

The productivity component measures the reduction in costs attributable to a reduction in the quantity of inputs used in year 2 relative to the quantity of inputs that would have been used in year 1 to produce the year 2 output.

Question 56

The price-recovery component measures the increase in operating income from selling more units of a product.

Question 57

The growth component measures the increase in revenues minus the increase in costs from selling more units of a product.

Question 58

Measures of the balanced scorecard's financial perspective include all of the following EXCEPT

A)operating income.
B)customer satisfaction.
C)gross profit percentage.
D)cost reductions.
E)return on investment.

Question 59

Wondergardens Ltd.operates amusement parks similar to those such as Six Flags, Universal Studios, Disneyland etc.Wondergardens' mission is to provide high quality family entertainment that exceed guests' expectations and will create lifelong memories.To achieve this goal, Wondergardens strives to provide safe, clean, friendly family environments at reasonable prices.In addition to the amusement parks, the company operates a community outreach program.Through volunteerism, it offers educational and recreational programs (e.
g.after school programs for children and teenagers, employment related training for adults)and special events at its facilities.Wondergardens' president, Roland Coaster, has asked you to lead a team of employees in developing a balanced scorecard for its parks.Required:
For each balanced scorecard perspective identify two measures of performance that relate to Wondergardens' key success factors.

Question 60

What are the four key perspectives in the balanced scorecard?

Question 61

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Luke Company's net increase in operating income as a result of the growth component?

A)$340,000 unfavourable
B)$140,000 favourable
C)$160,000 favourable
D)$190,000 favourable
E)$250,000 unfavourable

Question 62

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Luke Company's net increase in operating income as a result of the price-recovery component?

A)$179,000 favourable
B)$179,000 unfavourable
C)$182,000 unfavourable
D)$20,000 favourable
E)$20,000 unfavourable

Question 63

Use the information below to answer the following question(s).Following a strategy of product differentiation, Barry Company makes an XX 300.Barry Company presents the following data for the years 1 and 2. Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Barry Company has 23 customers in year 1 and 25 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Barry Company's cost effect of growth component?

A)$7,500 favourable
B)$28,500 favourable
C)$7,500 unfavourable
D)$28,500 unfavourable
E)$30,000 favourable

Question 64

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Luke Company's cost effect of growth component?

A)$60,000 unfavourable
B)$30,000 favourable
C)$60,000 favourable
D)$200,000 favourable
E)$30,000 unfavourable

Question 65

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Luke Company's revenue effect of price-recovery component?

A)$400,000 favourable
B)$220,000 unfavourable
C)$400,000 unfavourable
D)$420,000 unfavourable
E)$420,000 favourable

Question 66

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Luke Company's operating income for year 1?

A)$4,000,000
B)$804,500
C)$1,240,000
D)$1,240,500
E)$1,440,000

Question 67

Use the information below to answer the following question(s).Following a strategy of product differentiation, Barry Company makes an XX 300.Barry Company presents the following data for the years 1 and 2. Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Barry Company has 23 customers in year 1 and 25 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Barry Company's change in operating income from year 1 to year 2?

A)$147,600 favourable
B)$143,520 favourable
C)$156,120 favourable
D)$156,120 unfavourable
E)$242,000 favourable

Question 68

Use the information below to answer the following question(s).Following a strategy of product differentiation, Barry Company makes an XX 300.Barry Company presents the following data for the years 1 and 2. Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Barry Company has 23 customers in year 1 and 25 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Barry Company's operating income for year 1?

A)$210,000
B)$366,120
C)$1,000,000
D)$260,000
E)$231,000

Question 69

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Luke Company's cost effect of price-recovery component?

A)$126,000 favourable
B)$126,000 unfavourable
C)$241,000 unfavourable
D)$420,000 favourable
E)$238,000 unfavourable

Question 70

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Luke Company's productivity component of change in operating income?

A)$33,000 favourable
B)$45,500 favourable
C)$33,000 unfavourable
D)$45,500 unfavourable
E)$20,500 unfavourable

Question 71

Use the information below to answer the following question(s).Following a strategy of product differentiation, Barry Company makes an XX 300.Barry Company presents the following data for the years 1 and 2. Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Barry Company has 23 customers in year 1 and 25 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Barry Company's net increase in operating income as a result of the growth component?

A)$72,500 unfavourable
B)$72,500 favourable
C)$51,500 favourable
D)$99,500 unfavourable
E)$99,500 favourable

Question 72

Use the information below to answer the following question(s).Following a strategy of product differentiation, Barry Company makes an XX 300.Barry Company presents the following data for the years 1 and 2. Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Barry Company has 23 customers in year 1 and 25 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Barry Company's revenue effect of price-recovery component?

A)$54,000 favourable
B)$162,000 favourable
C)$54,000 unfavourable
D)$92,000 favourable
E)$50,000 unfavourable

Question 73

Use the information below to answer the following question(s).Following a strategy of product differentiation, Barry Company makes an XX 300.Barry Company presents the following data for the years 1 and 2. Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Barry Company has 23 customers in year 1 and 25 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Barry Company's revenue effect of growth component?

A)$92,000 favourable
B)$92,000 unfavourable
C)$80,000 unfavourable
D)$162,000 favourable
E)$80,000 favourable

Question 74

Use the information below to answer the following question(s).Following a strategy of product differentiation, Barry Company makes an XX 300.Barry Company presents the following data for the years 1 and 2. Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Barry Company has 23 customers in year 1 and 25 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Barry Company's cost effect of price-recovery component?

A)$61,000 favourable
B)$60,850 unfavourable
C)$60,100 favourable
D)$60,100 unfavourable
E)$61,000 unfavourable

Question 75

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Luke Company's revenue effect of growth component?

A)$440,000 favourable
B)$400,000 unfavourable
C)$400,000 favourable
D)$200,000 favourable
E)$220,000 favourable

Question 76

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Luke Company's change in operating income from year 1 to year 2?

A)$620,000 favourable
B)$364,500 unfavourable
C)$364,500 favourable
D)$200,000 favourable
E)$200,000 unfavourable

Question 77

The growth component of a change in operating income measures the effect of price changes on revenues and costs.

Question 78

Unused capacity is the amount of productive capacity available over and above the productive capacity employed to meet customer demand in the current period.

Question 79

Use the information below to answer the following question(s).Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Luke Company's operating income in Year 2?

A)$1,804,500
B)$1,440,000
C)$4,620,000
D)$200,000
E)$188,000

Question 80

Use the information below to answer the following question(s).Following a strategy of product differentiation, Barry Company makes an XX 300.Barry Company presents the following data for the years 1 and 2. Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced.Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support.Neither conversion costs or customer-service costs are affected by changes in actual volume.Barry Company has 23 customers in year 1 and 25 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
What is the Barry Company's operating income in year 2?

A)$378,600
B)$366,120
C)$1,242,000
D)$403,520
E)$210,000