Exam 14: The Strategic Management of Costs and Revenues

Although products are initially sold at a loss, under life cycle costing managers usually expect: I $\quad$ Sales volume increases for the product or related products over time II $\quad$ A shift to a commodity market over time III $\quad$ Cost reductions ouet time

Target costing is most likely to be successful when the:

Implementing a computer application to reduce non-value added paperwork and improve inventory tracking would result most directly from

List the three product characteristics that a target costing design team would choose to enhance or minimise as they make trade-offs to achieve the target cost. Describe two of the types of trade-offs they may consider.

Under kaizen costing, accountants forecast:

Life cycle costing is incompatible with activity-based costing.

Kaizen costing is similar to a budget except that kaizen costing:

Give a complete but concise explanation of the target costing cycle.

Explain how value chain analysis helps managers identify value-added and non-value-added activities.

Life cycle costing can be used to focus managers' attention on: I $\quad$ Development costs II $\quad$ Decommissioning costs III $\quad$ Marketing costs

PNG's managers estimate that a 50% increase in price would cause an 80% reduction in the quantity of product sold. Total fixed costs for the product are $5,000 and total variable costs are $4,000, based on production of 400 units. The following values may be useful: (0.2)=-1.609 (1.5)=0.405 (0.5)=-0.693 (4,000)=8.294 (0.8)=-0.223 (5,000)=8.517 PNG's price elasticity of demand is:

TMG produces and sells yachts for wealthy customers. TMG's accountants produced the data shown below as a basis for client negotiations for the coming year: Basic yacht \ 600 \ 600 \ 600 Customisation costs 300 500 200 Marketing costs Total costs \ Assume that all the preceding costs are avoidable. The company will incur an additional $800 in unavoidable costs during the coming year. TMG's managers want to achieve a profit margin of 80% based on total costs. Which customer's yacht will have the lowest total cost if unavoidable costs are allocated based on the cost of a basic yacht?

Target costing involves not only cost, but also product quality and functionality.

In cost-based pricing, mark-up percentages often originate from general industry practice.

Customers that are found to be the least profitable should be dropped.

The supply chain involves suppliers, but not customers.

Kaizen costing and target costing are two names for the same thing.

A target cost is the minimum cost a company should strive for to obtain its desired profit margin.

The statement concerning customer profitability analysis that is not true is:

The "death spiral" may be a problem when managers use: