Question 1

When analyzing the change in operating income,the strategy component of productivity will increase when ________.

Accepted Answer

A)  capacity is reduced 
B)  quality is enhanced 
C)  selling prices are increased 
D)  more units are produced and sold 
A)  capacity is reduced 
B)  quality is enhanced 
C)  selling prices are increased 
D)  more units are produced and sold

Question 2

Meale Company makes a household appliance with model number X500. The goal for 2015 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of X500 units that can be produced. The industry market size for appliances increased 10% from 2014 to 2015. The following additional data are available for 2014 and 2015:
 $\begin{array}{lrr}&2014&2015\
\text { Units of } X 500 \text { produced and sold } & 10,000 & 11,000 \
\text { Selling price } & \$ 100 & \$ 95 \
\text { Direct materials (square feet) } & 30,000 & 29,000 \
\text { Direct material costs per square foot } & \$ 10 & \$ 11\\text { Manufacturing capacity for } X 500 \text { (units) } & 12,500 & 12,000 \
\text { Total conversion costs } & \$ 250,000 & \$ 240,000 \
\text { Conversion costs per unit of capacity } & \$ 20 & \$ 20
\end{array}$
-Which of the following statements is true of strategic analysis of operating income?

Accepted Answer

A)  Change in operating income from one period to any future period can be subdivided into product differentiation, cost leadership, and growth components. 
B)  Subdividing the change in operating income to evaluate the success of a strategy has no similarity to the variance analysis. 
C)  Management accountants compare actual and budgeted operating performance over the same time periods. 
D)  It focuses on differences in individual categories of costs (direct materials, direct manufacturing labor, and overheads). 
A)  Change in operating income from one period to any future period can be subdivided into product differentiation, cost leadership, and growth components. 
B)  Subdividing the change in operating income to evaluate the success of a strategy has no similarity to the variance analysis. 
C)  Management accountants compare actual and budgeted operating performance over the same time periods. 
D)  It focuses on differences in individual categories of costs (direct materials, direct manufacturing labor, and overheads).

Question 3

Following a strategy of product differentiation,Sting Corporation makes a high-end computer monitor,CM7.Sting Corporation presents the following data for the years 2012 and 2013:
 $\begin{array}{lrr}&2012&2013\
\text { Units of CM7 produced and sold } & 5,000 & 5,500 \
\text { Selling price } & \$ 400 & \$ 440 \
\text { Direct materials (pounds) } & 15,000 & 15,375 \
\text { Direct materials costs per pound } & \$ 40 & \$ 44 \
\text { Manufacturing capacity for CM12 (units) } & 10,000 & 10,000\
\text { Conversion costs } & \$ 1,000,000 & \$ 1,100,000 \
\text { Conversion costs per unit of capacity } & \$ 100 & \$ 110 \
\text { Selling and customer-service capacity (customers) } & 60 & 58 \
\text { Total selling and customer-service costs } & \$ 360,000 & \$ 362,500 \
\text { Selling and customer-service capacity cost per customer } & \$ 6,000 & \$ 6,250
\end{array}$ Sting Corporation produces no defective units but it wants to reduce direct materials usage per unit of CM7 in 2012.Manufacturing conversion costs in each year depend on production capacity defined in terms of CM7 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.Ernsting Corporation has 100 customers in 2012 and 115 customers in 2013.The industry market size for high-end computer monitors increased 5% from 2012 to 2013.
Required:
a.What is the revenue effect of the price-recovery component?
b.What 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?

Accepted Answer

a.($440 - $400)× 5,500 = $220,000 F
b.15

Question 4

Answer the following questions using the information below:
Crynton Company makes a household appliance with model number L800. The goal for 2015 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of L800 units that can be produced. The industry market size for appliances increased 5% from 2014 to 2015. The following additional data are available for 2014 and 2015:
 $\begin{array}{lrr}&2014&2015\
\text { Units of L800 produced and sold } & 30,000 & 31,500 \
\text { Selling price } & \$ 300 & \$ 285 \
\text { Direct materials (square feet) } & 90,000 & 87,000 \
\text { Direct material costs per square foot } & \$ 30 & \$ 33\\text { Manufacturing capacity for L800 (units) } & 37,500 & 36,000 \
\text { Total conversion costs } & \$ 750,000 & \$ 720,000 \
\text { Conversion costs per unit of capacity } & \$ 60 & \$ 60
\end{array}$
-What is the revenue effect of the growth component?

Accepted Answer

A)  $450,000 U 
B)  $135,000 F 
C)  $135,000 U 
D)  $450,000 F 
A)  $450,000 U 
B)  $135,000 F 
C)  $135,000 U 
D)  $450,000 F

Question 5

Which of the following statements best define strategy?

Accepted Answer

A)  It describes how an organization can create value for its customers while differentiating itself from its competitors. 
B)  It is an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. 
C)  It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors. 
D)  It describes how an organization motivates its employees to work for more hours without any increase in their wages. 
A)  It describes how an organization can create value for its customers while differentiating itself from its competitors. 
B)  It is an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. 
C)  It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors. 
D)  It describes how an organization motivates its employees to work for more hours without any increase in their wages.

Question 6

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

Accepted Answer

A)  Performance scoreboard 
B)  Product differentiation 
C)  Differential report 
D)  Balanced scorecard 
A)  Performance scoreboard 
B)  Product differentiation 
C)  Differential report 
D)  Balanced scorecard

Question 7

Successful implementation of a product differentiation strategy will result in ________.

Accepted Answer

A)  a large favorable growth and price-recovery components 
B)  a large favorable price-recovery and productivity components 
C)  a large favorable productivity and growth components 
D)  only a large favorable growth component 
A)  a large favorable growth and price-recovery components 
B)  a large favorable price-recovery and productivity components 
C)  a large favorable productivity and growth components 
D)  only a large favorable growth component

Question 8

Heliem Corp.uses the balanced scorecard technique to achieve its long term objectives.Managers of Heliem came to know that all the balanced scorecards objectives were achieved other than financial perspective measures for the previous period.While the learning and growth and internal business processes perspective measures were achieved with relative ease,Heliem had to strive extremely hard to achieve customer oriented measures.The company had failed miserably in achieving its financial measures.
Using the given information,evaluate the strategy of Heliem and its implementation.

Accepted Answer

Heliem failed miserably in achieving its

Question 9

Companies which strive to achieve cost leadership should never try to implement business process reengineering measures.

Accepted Answer

A) True 
 B)False

Question 10

Answer the following questions using the information below:
Strategic Analysis of Profitability of Ransham Company:
 $\begin{array}{|l|l|l|l|l|l|}
\hline&\text { Income } & \text { Revenueand } & \text { Revenueand } & & \
&\text { Statement } & \text { Cost Effects } & \text { Cost Effects of } & \text { Cost Effect of } & \text { Income } \
&&\text { of Growth } & \text { Price-Recovery } & \text { Productivity } & \text { Statement } \
\text { Amounts } & \text { Component } & \text { Component } & \text { Component } & \text { Amounts } \
&\text { in 2014 } & \text { in 2015 } & \text { in 2015 } & \text { in 2015 } & \text { in 2015 } \
\hline \text { Revenues }(\$) & 34,000 & 10,000 \mathrm{~F} & 1,000 \mathrm{U} & (\mathrm{b}) & (\mathrm{e}) \
\hline \text { Costs } & 23,500 & (\mathrm{a}) & 500 \mathrm{U} & \text { (c) } & 26,100 \
\hline \text { Operating } & & & & & \
\text { income } & 10,500 & 5,500 \mathrm{~F} & 1,500 \mathrm{U} & 2,400 \mathrm{~F} & \text { (d) } \
\hline
\end{array}$
-What is the operating income amount for 2015 (d)?

Accepted Answer

A)  $43,000 
B)  $25,000 
C)  $16,900 
D)  $46,000 
A)  $43,000 
B)  $25,000 
C)  $16,900 
D)  $46,000

Question 11

Answer the following questions using the information below:
Strategic Analysis of Profitability of Ransham Company:
 $\begin{array}{|l|l|l|l|l|l|}
\hline&\text { Income } & \text { Revenueand } & \text { Revenueand } & & \
&\text { Statement } & \text { Cost Effects } & \text { Cost Effects of } & \text { Cost Effect of } & \text { Income } \
&&\text { of Growth } & \text { Price-Recovery } & \text { Productivity } & \text { Statement } \
\text { Amounts } & \text { Component } & \text { Component } & \text { Component } & \text { Amounts } \
&\text { in 2014 } & \text { in 2015 } & \text { in 2015 } & \text { in 2015 } & \text { in 2015 } \
\hline \text { Revenues }(\$) & 34,000 & 10,000 \mathrm{~F} & 1,000 \mathrm{U} & (\mathrm{b}) & (\mathrm{e}) \
\hline \text { Costs } & 23,500 & (\mathrm{a}) & 500 \mathrm{U} & \text { (c) } & 26,100 \
\hline \text { Operating } & & & & & \
\text { income } & 10,500 & 5,500 \mathrm{~F} & 1,500 \mathrm{U} & 2,400 \mathrm{~F} & \text { (d) } \
\hline
\end{array}$
-What is the revenue amount for 2015 (e)?

Accepted Answer

A)  $9,000 
B)  $25,000 
C)  $43,000 
D)  $16,900 
A)  $9,000 
B)  $25,000 
C)  $43,000 
D)  $16,900

Question 12

The first step to successful balanced scorecard implementation is clarifying the ________.

Accepted Answer

A)  organization's vision and strategy 
B)  elements that pertain to value-added aspects of the business 
C)  owner's expectations about return on investment 
D)  objectives of all four balanced scorecard measurement perspectives 
A)  organization's vision and strategy 
B)  elements that pertain to value-added aspects of the business 
C)  owner's expectations about return on investment 
D)  objectives of all four balanced scorecard measurement perspectives

Question 13

Discretionary costs are not easily controllable compared to engineered costs.

Accepted Answer

A) True 
 B)False

Question 14

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.To further company strategy,measures on the balanced scorecard would most likely include ________.

Accepted Answer

A)  number of process improvements 
B)  manufacturing quality 
C)  yield 
D)  an increase in operating income from productivity gains 
A)  number of process improvements 
B)  manufacturing quality 
C)  yield 
D)  an increase in operating income from productivity gains

Question 15

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 is ________.

Accepted Answer

A)  directing 
B)  controlling 
C)  reengineering 
D)  structuring 
A)  directing 
B)  controlling 
C)  reengineering 
D)  structuring

Question 16

Cost-leadership strategy always advocates cuts in personnel to achieve cost reduction.

Accepted Answer

A) True 
 B)False

Question 17

Cobalt Company makes a household appliance with model number X500.The goal for 2015 is to improve product design and outlook.No defective units are currently produced.Manufacturing conversion costs depend on production capacity defined in terms of X500 units that can be produced.The industry market size for appliances increased 10% from 2014 to 2015.The following additional data are available for 2014 and 2015: $\begin{array}{lrr}&2014&2015\
\text { Units of } X 500 \text { produced and sold } & 20,000 & 20,000 \
\text { Selling price } & \$ 150 & \$ 170 \
\text { Direct materials (square feet) } & 30,000 & 32,500 \
\text { Direct material costs per square foot } & \$ 10 & \$ 10\
\text { Manufacturing capacity for } X 500 \text { (units) } & 20,500 & 20,500 \
\text { Total conversion costs } & \$ 451,000 & \$ 493,250 \
\text { Conversion costs per unit of capacity } & \$ 22 & \$ 22.5
\end{array}$ Out of the two basic strategies,Cobalt's strategy is ________.

Accepted Answer

A)  product differentiation because Cobalt is able to produce a given quantity of output with a lower cost of inputs 
B)  cost leadership because Cobalt is able to produce a given quantity of output with a lower cost of inputs 
C)  cost leadership because Cobalt is able to increase its output price faster than the increase in its input prices 
D)  product differentiation because Cobalt is able to increase its output price faster than the increase in its input prices 
A)  product differentiation because Cobalt is able to produce a given quantity of output with a lower cost of inputs 
B)  cost leadership because Cobalt is able to produce a given quantity of output with a lower cost of inputs 
C)  cost leadership because Cobalt is able to increase its output price faster than the increase in its input prices 
D)  product differentiation because Cobalt is able to increase its output price faster than the increase in its input prices

Question 18

In an effective balanced scorecard,________.

Accepted Answer

A)  net income serves as the best indicator for the hard-to measure long-run nonfinancial performance 
B)  sales budget serves as one of the leading indicator for the hard-to measure short-run financial performance 
C)  sales budget serves as a leading indicator for the hard-to measure short-run nonfinancial performance 
D)  customer satisfaction serves as one of the leading indicator for the hard-to measure long-run financial performance 
A)  net income serves as the best indicator for the hard-to measure long-run nonfinancial performance 
B)  sales budget serves as one of the leading indicator for the hard-to measure short-run financial performance 
C)  sales budget serves as a leading indicator for the hard-to measure short-run nonfinancial performance 
D)  customer satisfaction serves as one of the leading indicator for the hard-to measure long-run financial performance

Question 19

To achieve success,it is important to set nonfinancial objectives as well as financial objectives.

Accepted Answer

A) True 
 B)False

Question 20

Answer the following questions using the information below:
Crynton Company makes a household appliance with model number L800. The goal for 2015 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of L800 units that can be produced. The industry market size for appliances increased 5% from 2014 to 2015. The following additional data are available for 2014 and 2015:
 $\begin{array}{lrr}&2014&2015\
\text { Units of L800 produced and sold } & 30,000 & 31,500 \
\text { Selling price } & \$ 300 & \$ 285 \
\text { Direct materials (square feet) } & 90,000 & 87,000 \
\text { Direct material costs per square foot } & \$ 30 & \$ 33\\text { Manufacturing capacity for L800 (units) } & 37,500 & 36,000 \
\text { Total conversion costs } & \$ 750,000 & \$ 720,000 \
\text { Conversion costs per unit of capacity } & \$ 60 & \$ 60
\end{array}$
-Overall,was Crynton's strategy successful in 2015?

Accepted Answer

A)  Yes, because total revenues increased 
B)  No, because operating income decreased 
C)  No, because direct materials usage per unit increased 
D)  No, because direct material cost per unit decreased 
A)  Yes, because total revenues increased 
B)  No, because operating income decreased 
C)  No, because direct materials usage per unit increased 
D)  No, because direct material cost per unit decreased

When analyzing the change in operating income,the strategy component of productivity will increase when ________.

Which of the following statements best define strategy?

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

Successful implementation of a product differentiation strategy will result in ________.

Companies which strive to achieve cost leadership should never try to implement business process reengineering measures.

The first step to successful balanced scorecard implementation is clarifying the ________.

Discretionary costs are not easily controllable compared to engineered costs.

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 is ________.

Cost-leadership strategy always advocates cuts in personnel to achieve cost reduction.

In an effective balanced scorecard,________.

To achieve success,it is important to set nonfinancial objectives as well as financial objectives.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters

Exam 12: Strategy, balanced Scorecard, and Strategic Profitability Analysis

When analyzing the change in operating income,the strategy component of productivity will increase when ________.

Which of the following statements best define strategy?

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

Successful implementation of a product differentiation strategy will result in ________.

Companies which strive to achieve cost leadership should never try to implement business process reengineering measures.

The first step to successful balanced scorecard implementation is clarifying the ________.

Discretionary costs are not easily controllable compared to engineered costs.

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 is ________.

Cost-leadership strategy always advocates cuts in personnel to achieve cost reduction.

In an effective balanced scorecard,________.

To achieve success,it is important to set nonfinancial objectives as well as financial objectives.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters