Exam 13: Strategy, Balanced Scorecard, and Profitability Analysis

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

Fairytale Weddings manufactures wedding dresses. The following information relates to the manufacture of gowns in its Perth plant: Required: Prepare an analysis of change in annual costs from year 1 to year 2 including direct materials, direct manufacturing labour, and total inputs.

Successful reengineering involves all of the following EXCEPT

Use the information below to answer the following question(s). Following a strategy of product differentiation, Ernsting Ltd. makes high quality electronic components. Ernsting Ltd. presents the following data for the past two years relating to its XJ649 product. Ernsting produces no defective units but it wants to reduce direct materials usage per unit in Year 2 Manufacturing conversion costs in each year depend on production capacity defined in terms of 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. Ernsting has 60 customers in Year 1 and 66 customers in Year 2. The industry market size for the product increased 6% from Year 1 to Year 2. Of the $50 increase in unit selling price, $30 is attributable to a general price increase. -Required: a. What amount is the revenue effect of the price-recovery component? b. What amount is the cost effect of the price-recovery component? c. What is the net effect on operating income as a result of the price-recovery component? d. What is the net effect on operating income as a result of the productivity component?

Unused capacity is difficult to determine for

Which of the following is a force that shapes an organization's profit potential?

Use the information below to answer the following question(s). Following a strategy of product differentiation, Ernsting Ltd. makes high quality electronic components. Ernsting Ltd. presents the following data for the past two years relating to its XJ649 product. Ernsting produces no defective units but it wants to reduce direct materials usage per unit in Year 2 Manufacturing conversion costs in each year depend on production capacity defined in terms of 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. Ernsting has 60 customers in Year 1 and 66 customers in Year 2. The industry market size for the product increased 6% from Year 1 to Year 2. Of the $50 increase in unit selling price, $30 is attributable to a general price increase. -Required: a. What is the operating income for Year 1? b. What is the operating income in Year 2? c. What is the change in operating income from Year 1 to Year 2?

What is the primary purpose of the balanced scorecard?

________ is the ratio of the quantity of output produced to the costs of all inputs used, where the inputs are combined on the basis of current period prices.

Which of the following statements about productivity measures is true?

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 net increase in operating income as a result of the price-recovery component?

Productivity measures the relationship between actual inputs used (both quantities and costs) and standard outputs produced.

________ measures the changes in operating income attributed solely to an increase in the quantity of output between years one and two.

Use the information below to answer the following question(s). Following a strategy of product differentiation, Instruments Inc. makes a hand held calculator, II400. Instruments Inc. presents the following data for the years 1 and 2 Instruments Inc. produces no defective units but it wants to reduce direct materials usage per unit of II400 in year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of II400 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. Instruments Inc. has 23 customers in year 1 and 25 customers in year 2. The industry market size for hand held calculators increased 5% from year 1 to year 2. -Required: a. What is the net effect on operating income as a result of the productivity component?

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 net increase in operating income as a result of the growth component?

An organization that is using the product differentiation approach would

Which of the following would result in an increase in total factor productivity, assuming all other variables are held constant?

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

Which of the following best describes the effect of uncertainty?

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 cost effect of growth component?