39. The management accountant at Jang Manufacturing Co. collected the following data in
preparation for a life-cycle analysis on one of its products, a leaf blower:
Item
This Year
Change Over
Last Year Average
Annual
Change Over
the Last Four
Years
Annual sales $3,200,000 -2.4% +3.5%
Unit sales price 500 -2.1% +3.3%
Unit profit 100 -10.0% +2.0%
Total profit 700,000 -1.2% +3.0%
The stage of the sales life cycle the product is in is:
40. Bryan Inc. produces a specialty top-quality juice machine. The product, the JM50,
requires four processes to be completed. Specifically, these processes are exterior construction,
pulp filter insertion, painting, and packaging. Each process is performed at separate workstations
with different completion rates:
Exterior construction can manufacture 100,000 juicer exteriors per day.
Pulp filter insertion can install 25,000 filters every 6 hours.
Painting can decorate 3,000 juicers every half hour.
Packaging can package 5,000 juicers per hour.
The plant operates 24/7, 24 hours a day every day of the week.
How many JM50 machines can Bryan Inc. manufacture per month (assume an average 30-day
month)?
41. Bryan Inc. produces a specialty top-quality juice machine. The product, the JM50,
requires four processes to be completed. Specifically, these processes are exterior construction,
pulp filter insertion, painting, and packaging. Each process is performed at separate workstations
with different completion rates:
Exterior construction can manufacture 100,000 juicer exteriors per day.
Pulp filter insertion can install 25,000 filters every 6 hours.
Painting can decorate 3,000 juicers every half hour.
Packaging can package 5,000 juicers per hour.
The plant operates 24/7, 24 hours a day every day of the week.
Which function(s) is/are the bottleneck(s)?
42. Bryan Inc. produces a specialty top-quality juice machine. The product, the JM50,
requires four processes to be completed. Specifically, these processes are exterior construction,
pulp filter insertion, painting, and packaging. Each process is performed at separate workstations
with different completion rates:
Exterior construction can manufacture 100,000 juicer exteriors per day.
Pulp filter insertion can install 25,000 filters every 6 hours.
Painting can decorate 3,000 juicers every half hour.
Packaging can package 5,000 juicers per hour.
The plant operates 24/7, 24 hours a day every day of the week.
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?
43. Bryan Inc. produces a specialty top-quality juice machine. The product, the JM50,
requires four processes to be completed. Specifically, these processes are exterior construction,
pulp filter insertion, painting, and packaging. Each process is performed at separate workstations
with different completion rates:
Exterior construction can manufacture 100,000 juicer exteriors per day.
Pulp filter insertion can install 25,000 filters every 6 hours.
Painting can decorate 3,000 juicers every half hour.
Packaging can package 5,000 juicers per hour.
The plant operates 24/7, 24 hours a day every day of the week.
What cost management technique does this case illustrate?
44. Place the phases of the cost life cycle (value chain) in the correct order from upstream to
downstream activities.
45. Target cost can be defined as:
46. Which of the following is the speed at which units must be manufactured to meet
customer demand?
47. Electronic Component Company (ECC) is a producer of high-end video and music
equipment. ECC currently sells its top of the line “ECC” DVD player for a price of $250. It costs
ECC $210 to make the player. ECC’s main competitor is coming to market with a new DVD player
that will sell for a price of $220. ECC feels that it must reduce its price to $220 in order to
compete. The sales and marketing department of ECC believes the reduced price will cause sales
to increase by 15%. ECC currently sells 200,000 DVD players per year.
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?
48. Electronic Component Company (ECC) is a producer of high-end video and music
equipment. ECC currently sells its top of the line “ECC” DVD player for a price of $250. It costs
ECC $210 to make the player. ECC’s main competitor is coming to market with a new DVD player
that will sell for a price of $220. ECC feels that it must reduce its price to $220 in order to
compete. The sales and marketing department of ECC believes the reduced price will cause sales
to increase by 15%. ECC currently sells 200,000 DVD players per year.
What is the target cost if target profit is 20% of sales and ECC must meet the competitive price of
$220?
0.8 × $220 = $176.00
49. Electronic Component Company (ECC) is a producer of high-end video and music
equipment. ECC currently sells its top of the line “ECC” DVD player for a price of $250. It costs
ECC $210 to make the player. ECC’s main competitor is coming to market with a new DVD player
that will sell for a price of $220. ECC feels that it must reduce its price to $220 in order to
compete. The sales and marketing department of ECC believes the reduced price will cause sales
to increase by 15%. ECC currently sells 200,000 DVD players per year.
Assuming sales and marketing are not correct in their estimation and the volume of sales is not
changed and ECC meets the competitive price, what is the target cost if ECC wants to maintain
its same income level?
50. Which of the following phases are included in the sales life cycle?
Growth Sustainability Decline
A) Yes Yes Yes
B) Yes Yes No
C) Yes No Yes
D) No Yes Yes
51. During the sales life cycle, which is an example of what happens during the introduction
phase?
52. During the sales life cycle, which is an example of what happens during the growth
phase?
53. During the sales life cycle, which is an example of what happens during the maturity
phase?
54. When comparing Activity-based costing (ABC) and the Theory of Constraints (TOC), the
approach each method takes toward profitability analysis is:
55. 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
56. Quality Chairs Inc. (QC) manufactures chairs for industrial use. Laura Winters, the Vice
President for Marketing at QC, concluded from market analysis that sales were dwindling for
QC’s standard three-foot chair due to aggressive pricing by competitors. QC’s chairs sold for $550
whereas the competition’s comparable chair was selling for $495. Winters determined that a
price drop to $495 would be necessary to regain market share and annual sales of 10,000 chairs.
Cost data based on sales of 10,000 chairs:
Budgeted Quantity Actual Quantity Actual Cost
Direct materials (board feet) 88,000 79,500 $1,250,000
Direct labor (hours) 71,350 73,775 875,000
Machine hours (hours) 11,400 11,250 250,000
Finishing and packing (hours) 6,500 6,400 125,000
The current cost per unit is:
57. Quality Chairs Inc. (QC) manufactures chairs for industrial use. Laura Winters, the Vice
President for Marketing at QC, concluded from market analysis that sales were dwindling for
QC’s standard three-foot chair due to aggressive pricing by competitors. QC’s chairs sold for $550
whereas the competition’s comparable chair was selling for $495. Winters determined that a
price drop to $495 would be necessary to regain market share and annual sales of 10,000 chairs.
Cost data based on sales of 10,000 chairs:
Budgeted Quantity Actual Quantity Actual Cost
Direct materials (board feet) 88,000 79,500 $1,250,000
Direct labor (hours) 71,350 73,775 875,000
Machine hours (hours) 11,400 11,250 250,000
Finishing and packing (hours) 6,500 6,400 125,000
The current profit per unit is:
58. Quality Chairs Inc. (QC) manufactures chairs for industrial use. Laura Winters, the Vice
President for Marketing at QC, concluded from market analysis that sales were dwindling for
QC’s standard three-foot chair due to aggressive pricing by competitors. QC’s chairs sold for $550
whereas the competition’s comparable chair was selling for $495. Winters determined that a
price drop to $495 would be necessary to regain market share and annual sales of 10,000 chairs.
Cost data based on sales of 10,000 chairs:
Direct materials (board feet)
Direct labor (hours)
Machine hours (hours)
Finishing and packing (hours)
If the profit per unit is maintained, the target cost per unit is:
59. Quality Chairs Inc. (QC) manufactures chairs for industrial use. Laura Winters, the Vice
President for Marketing at QC, concluded from market analysis that sales were dwindling for
QC’s standard three-foot chair due to aggressive pricing by competitors. QC’s chairs sold for $550
whereas the competition’s comparable chair was selling for $495. Winters determined that a
price drop to $495 would be necessary to regain market share and annual sales of 10,000 chairs.
Cost data based on sales of 10,000 chairs:
Budgeted Quantity Actual Quantity Actual Cost
Direct materials (board feet) 88,000 79,500 $1,250,000
Direct labor (hours) 71,350 73,775 875,000
Machine hours (hours) 11,400 11,250 250,000
Finishing and packing (hours) 6,500 6,400 125,000
In order to reduce costs so as to reach the desired target cost, Quality Chairs should also focus
on reducing the cost of: