Question 1

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

Accepted Answer

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

Question 2

Bakker Industries sells three products (611, 613, and 615) that it manufactures in four departments. Both labor and machine time are applied to products in each of the four departments. The machine-processing and labor skills required in each department prohibit switching either machines or labor from one department to another. However, Bakker has a good supply of both full-time and part-time labor and does not expect hiring or retention of employees to be a problem. Because of the availability of part-time labor, Bakker considers labor a variable cost and includes it in the calculation of throughput margin.
Bakker's management is planning its production schedule for the next several months. Some machines will be out of service for extensive overhauling. Available machine times by department for each of the next six months are as follows:  Labor and machine specifications per unit of product are as follows:  The Sales Department's forecast of product demand over the next six months is as follows:  Bakker's inventory levels will not increase or decrease during the next six months. The unit price and cost data valid for the coming six months are as follows:  Required:
1. Determine whether Bakker can meet the monthly sales demand for the three products. What department, if any, is a constraint?
2. What monthly production schedule would be best for Bakker Industries?

Accepted Answer

The answer of Bakker Industries sells three products (611, 613,...

Question 3

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?

Accepted Answer

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

Question 4

What price will the company charge if the firm uses cost-plus pricing based on total variable cost and a markup percentage of 150%?

Accepted Answer

A) $405.00. 
B) $540.00. 
C) $675. 
D) $900.00. 
E) Some other amount.

Question 5

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 6

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 7

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:  Required:
Determine what stage of the sales life cycle the leaf blower is in and explain your reasoning.

Accepted Answer

The answer of The management accountant at the Huang Manufacturing...

Question 8

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

Accepted Answer

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

Question 9

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

Accepted Answer

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

Question 10

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 11

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

Accepted Answer

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 12

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:  Motorcycle Rentals Inc. began business two years ago with a $400,000 expenditure for a fleet of 45 motorcycles. These are expected to last five more years, at which time a new fleet will be purchased. Jeremy is satisfied with the steady average rentals per year of 10,000.
Required:
1. What price should Jeremy charge per rental for the business to make a twenty percent life cycle profit?
2. What price should Jeremy charge per rental for the business to make a before-tax thirty percent return on investment?

Accepted Answer

The answer of Amanda Jones owns and operates Motorcycle Rentals...

Question 13

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?

Accepted Answer

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

Question 14

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?

Accepted Answer

A) $280.00. 
B) $292.50. 
C) $299.00. 
D) $308.50.

Question 15

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.  Required:
1. Calculate the target cost for maintaining current market share and profitability.
2. How should the company attempt to reduce cost to meet the new target cost?

Accepted Answer

The answer of DualShaft Inc. manufactures a wide variety of...

Question 16

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

Accepted Answer

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 17

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

Accepted Answer

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

Question 18

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

Accepted Answer

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

Question 19

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:  Required:
Determine the MCE time for the most recent month. What can you infer from the MCE time that you calculated?

Accepted Answer

The answer of PharmCo Manufacturing operates a contract manufacturing plant...

Question 20

Which is the most profitable product if there is no constraint on labor time?

Accepted Answer

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

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

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

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?

What price will the company charge if the firm uses cost-plus pricing based on total variable cost and a markup percentage of 150%?

The product cost for model F-32 is:

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

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: Required: Determine what stage of the sales life cycle the leaf blower is in and explain your reasoning.

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

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

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

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

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?

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?

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

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

Which is the most profitable product if there is no constraint on labor time?