Question 1

Following a strategy of product differentiation, Izzy's Limited Company makes a high-end Appliance, XT15. Izzy's Limited presents the following data for the years 2017 and 2018:

Izzy's Limited produces no defective units but it wants to reduce direct materials usage per unit of XT15. Manufacturing conversion costs in each year depend on production capacity defined in terms of XT15 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. Izzy's Limited had 135 customers in 2017 and 140 customers in 2018.
What is operating income for 2017?

Accepted Answer

A)  $4,974,000 
B)  $7,860,000 
C)  $7,269,000 
D)  $5,203,500

Question 2

When analyzing the change in operating income, the strategy component of growth ________.

Accepted Answer

A)  calculations are similar to the selling-price variance calculations 
B)  isolates the change attributed solely to an increase in market share 
C)  isolates the change attributed solely to an increase in industry growth 
D)  isolates the change attributed solely to an increase in the quantity of units sold

Question 3

What is the term for an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control?

Accepted Answer

A)  Marketing strategy 
B)  Product differentiation 
C)  Cost leadership 
D)  Competitor differentiation

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

________ are the subdivisions of income that management accountants use for the strategic analysis of operating income.

Accepted Answer

A)  Growth, price-recovery and cost leadership components 
B)  Growth, price-recovery and productivity components 
C)  Cost leadership, price-recovery and productivity components 
D)  Growth, cost leadership and productivity components

Question 6

An operating income analysis of Fast Processing Company revealed the following:

Fast's operating income gain is consistent with the ________.

Accepted Answer

A)  product differentiation strategy 
B)  product leadership strategy 
C)  cost differentiation strategy 
D)  cost leadership strategy

Question 7

Which of the following statements is true of productivity measures?

Accepted Answer

A)  Partial productivity and total factor productivity measures never work best together. 
B)  Partial productivity explicitly considers gains from using fewer physical inputs as well as substitution among inputs. 
C)  All productivity measures are physical measures lacking financial content. 
D)  Total factor productivity considers the trade-offs across various inputs based on current input prices.

Question 8

Following a strategy of product differentiation, Izzy's Limited Company makes a high-end Appliance, XT15. Izzy's Limited presents the following data for the years 2017 and 2018:

Izzy's Limited produces no defective units but it wants to reduce direct materials usage per unit of XT15. Manufacturing conversion costs in each year depend on production capacity defined in terms of XT15 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. Izzy's Limited had 165 customers in 2017 and 170 customers in 2018.
What is the net effect on operating income as a result of the growth component? (Round any intermediary calculations to two decimals and your final answer to the nearest dollar.)

Accepted Answer

A)  $2,977,094 F 
B)  $473,600 F 
C)  $473,600 U 
D)  $2,977,094 U

Question 9

Which of the following statements is true of productivity?

Accepted Answer

A)  Partial productivity compares the quantity of output produced with the cost of all inputs used. 
B)  Productivity will increase when the partial productivity is high. 
C)  Prices of inputs are incorporated in the partial productivity ratio. 
D)  Partial productivity compares the quantity of output produced with the quantity of all inputs used.

Question 10

An organization that is using the product differentiation approach would most likely do which of the following?

Accepted Answer

A)  focus on tight cost control to create a reputation of saving its customers money 
B)  use innovative research and development and develop effective promotional campaigns to increase customer loyalty and charge higher prices 
C)  provide products that are similar to competitors 
D)  offer products at a lower cost than competitors

Question 11

Which of the following questions best relates to the balanced scorecard's internal business processes perspective?

Accepted Answer

A)  How do we streamline operations to lower costs to increase profits? 
B)  How do we motivate employees so that they can become more productive? 
C)  How can we increase our market share? 
D)  How can our processes be executed in such a way as to l increase value to customers?

Question 12

Define engineered and discretionary costs and give two examples of each.

Accepted Answer

The answer of Define engineered and discretionary costs and give...

Question 13

The financial perspective of the balanced scorecard focuses on the profits and value created for shareholders.

Accepted Answer

A) True 
 B)False

Question 14

Trusted Products Company makes a household appliance with model number L800. The goal for 2018 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 15% from 2017 to 2018. The following additional data are available for 2017 and 2018:

What is the cost effect of the growth component for conversion costs?

Accepted Answer

A)  $1600 U 
B)  $0 
C)  $40,000 U 
D)  $40,000 F

Question 15

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).

Question 16

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

Question 17

Strategic Analysis of Profitability of King Philip Company:

What is the revenue effect of the productivity component (b)?

Accepted Answer

A)  $0 
B)  $2600 U 
C)  $1200 F 
D)  $2600 F

Question 18

One of the five forces of industry analysis is understand the bargaining power of customers.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is a disadvantage of balanced scorecards?

Accepted Answer

A)  Balanced scorecards ignore short-run objectives. 
B)  Balanced scorecards may become unwieldy and difficult to understand. 
C)  Balanced scorecards use a lot of nonfinancial measures. 
D)  Balanced scorecards are of little use in influencing managerial behavior.

Question 20

Which of the following statements is true of the internal-business-process perspective of a balanced scorecard?

Accepted Answer

A)  Internal-business-process perspective is composed of three subprocesses: innovation process; learning-and-growth process; and post sales-service process. 
B)  Internal-business-process perspective evaluates the profitability of the strategy and the creation of shareholder value. 
C)  Internal-business-process improvement targets are often determined after benchmarking against an organization's main competitors standards. 
D)  Internal-business-process perspective is composed of three subprocesses: operations process; learning-and-growth process; and post sales-service process.

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

When analyzing the change in operating income, the strategy component of growth ________.

What is the term for an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control?

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

________ are the subdivisions of income that management accountants use for the strategic analysis of operating income.

An operating income analysis of Fast Processing Company revealed the following: Fast's operating income gain is consistent with the ________.

Which of the following statements is true of productivity measures?

Which of the following statements is true of productivity?

An organization that is using the product differentiation approach would most likely do which of the following?

Which of the following questions best relates to the balanced scorecard's internal business processes perspective?

Define engineered and discretionary costs and give two examples of each.

The financial perspective of the balanced scorecard focuses on the profits and value created for shareholders.

Which of the following statements is true of strategic analysis of operating income?

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 ________.

Strategic Analysis of Profitability of King Philip Company: What is the revenue effect of the productivity component (b) ?

One of the five forces of industry analysis is understand the bargaining power of customers.

Which of the following statements is a disadvantage of balanced scorecards?

Which of the following statements is true of the internal-business-process perspective of a balanced scorecard?