Question 1

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?

Accepted Answer

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

Question 2

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

Accepted Answer

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

Question 3

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

Accepted Answer

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 4

Target cost can be defined as:

Accepted Answer

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

Question 5

Bell Company produces and sells three products (A, B, C). The following data relate to the three products. Management considers labor to be a fixed cost.  Required:
1. Calculate the contribution per labor minute for each product.
2. Determine the best product mix. Assume there are five employees, and given time for breaks, training, and regular meetings, there are a total of 2,200 minutes available per day.

Accepted Answer

The answer of Bell Company produces and sells three products...

Question 6

Profit before taxes for the Bskin product, per life-cycle income statements, is:

Accepted Answer

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

Question 7

Life Cycle Costing Income Statements
The following revenue and cost data are for Turner Manufacturing's two radial saws. The L40 is for the commercial market and the L50 is for industrial customers. Both products are expected to have three-year life cycles.   Required
1. How would a product life-cycle income statement differ from the above income statements?
2. Prepare a three-year life-cycle income statement for both products. Which product appears to be more profitable and why?
3. Prepare a schedule showing each cost category as a percentage of total annual costs. What do you think this indicates about the profitability of each product over the three-year life cycle?

Accepted Answer

The answer of  Life Cycle Costing Income Statements
The following...

Question 8

What is the target cost if target profit is 20% of sales and ECC must meet the competitive price of $220?

Accepted Answer

A) $168.50. 
B) $176.00. 
C) $184.25. 
D) $190.00.

Question 9

Which of the following is a theory of constraints (TOC) measure of product profitability that equals price less materials cost, including all purchased components and materials handling costs?

Accepted Answer

A) Takt time. 
B) Throughput margin. 
C) Profitability margin. 
D) Price analysis.

Question 10

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)?

Accepted Answer

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

Question 11

What price will the company charge if the firm uses cost-plus pricing based on absorption cost and a markup percentage of 110%?

Accepted Answer

A) $445.50. 
B) $850.50. 
C) $660. 
D) $1260. 
E) Some other amount.

Question 12

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.  Required:
1. Explain why Gail may be wrong in her assessment of the relative performances of the two product lines.
2. Suppose that 80 percent of the R&D and selling expenses are traceable to Hardware line. Prepare life-cycle income statements for each product and calculate the return on sales. What does this tell you about the importance of accurate life-cycle costing?

Accepted Answer

The answer of Gail Johnston is the CFO of Lancet...

Question 13

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:

Accepted Answer

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

Question 14

The product cost for model F-32 is:

Accepted Answer

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

Question 15

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:

Accepted Answer

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

Question 16

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

Accepted Answer

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

Question 17

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?

Accepted Answer

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

Question 18

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

Accepted Answer

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

Question 19

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.  The time required for each activity and the total time available are shown below.  Required:
What is the most profitable production plan for Jamestown? Explain your answer with supporting calculations.

Accepted Answer

The answer of Jamestown Furniture Co. is a small, but...

Question 20

How many JM50 machines can Bryan Inc. manufacture per month (assume an average 30-day month)?

Accepted Answer

A) 4,320,000 juicers. 
B) 3,600,000 juicers. 
C) 3,000,000 juicers. 
D) 3,200,000 juicers

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