Which of the following aspects of a company could be considered a critical success factor, given the

1. Which of the following aspects of a company could be considered a critical success factor, given the appropriate business environment?

A) cutting edge research and development.

B) award-winning product quality.

C) excellent customer service.

D) continually beating competitors to the market with new, innovative products

E) all of the above characteristics could be seen as critical success factors, depending on the situation

2. A firm that has traditionally succeeded on the basis of its high quality products and excellent customer service has started to decrease many of its internal budgets, as well as placed greater emphasis on reducing waste and providing its clientele with the lowest priced product. Which of the following most accurately describes this change on competitive strategy?

A) Cost leadership to differentiation. B) Focus to cost leadership.

C) Differentiation to focus. D) Cost leadership to focus.

E) Differentiation to cost leadership.

F) Focus to differentiation.

3. The competitive strategy in which the firm succeeds by developing and maintaining a unique value for the product, as perceived by the customers is termed:

A) differentiation.

B) specialization advantage.

C) design strategy.

D) design focus.

E) product specialization.

4. Which of the following statements concerning value chain analysis is false?

A) The goal of value chain analysis is to find area where a company can either add value or reduce cost.

B) The value chain focuses on the entire production process, as well as the sale of the product and service after the sale.

C) If a company discovers that it can't compete in a specific area of the value, it might want to consider the option of outsourcing that portion of the value chain to someone who can perform it better.

D) Throughout business, the most successful firms are the ones that operate within the entire value chain, thereby doing every aspect of the process.

5. When a firm is determining its opportunities and threats, which of the following would not be mentioned?

A) An intense rivalry with a local competitor was beginning to start a price war.

B) The incredible success of the firm's latest marketing campaign.

C) The firm just received a patent on its product, thereby ensuring that no new competitors would be able to surprise the company.

D) In spite of its patent, there are several substitute products consumers could use.

6. Which of the following tend to be non-differential in the short term since they cannot be changed, but are more likely to be differential in the long term?

A) variable costs.

B) fixed costs.

C) mixed costs.

D) semivariable costs.

E) discretionary costs.

7. How will unit (or average) cost of manufacturing (materials, labor and overhead) usually change if the production level rises?

A) It will remain constant.

B) It will increase in direct proportion to the production increase.

C) It will increase, but inversely with the production increase.

D) It will decrease, but not in direct proportion to the production increase.

E) It will decrease inversely and in direct proportion to the production increases.

8. Operating leverage increases with

A) high variable cost.

B) high fixed cost.

C) high total cost.

D) high contribution margin.

E) high sales.

9. The linear equation Y = a + bX is often used to express cost formulas. In this equation:

A) the a term represents variable cost in total.

B) the b term represents variable cost per unit of activity.

C) the X term represents total cost.

D) the Y term represents total fixed cost.

10. The master budget process usually begins with the:

A) production budget.

B) selling and administrative expense budget.

C) sales budget.

D) cash budget.

11. In an organization that makes furniture, which of the following is a value-added activity?

A) purchasing direct materials.

B) inspecting production.

C) storing finished goods inventory.

D) moving work-in-process inventory around the factory.

E) waiting for incoming materials.

12-15 use the following:

Advanced Company is installing an ABC system and needs to know the level of a few activities. Advanced has already determined which costs are directly traceable to product and customers. Only those costs left to be allocated/assigned are of concern here.

Advanced Company produces two products—high-tech global positioning systems (GPS) and low-tech compasses—using portions of the same assembly line. One design department handles the design of both products. The GPSs are made in batches of 50, while the compasses are made in batches of 5,000. GPSs require a one-hour inspection, while compasses require a one-minute inspection.

Using these answers choices, indicate whether the following four activities are:

A. Unit level B. Batch level C. Product level

D. Customer level E. Facility sustaining F. Organization sustaining

12. Setup machines Batch level

13. Enter customer orders Customer leve;

14. Prepare annual financial statements Organization Sustaining

15. Design products Product level

20. Holdren Company expects the following credit sales for the first four months of the year: January, $12,500; February, $18,000; March, $16,000; April, $15,000. Experience has shown that payment for the credit sales is received as follows: 10% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 10% is uncollectible. How much cash can Holdren Company expect to collect in March as a result of credit sales?

Expected March cash collections: $__________

21. Quirch Inc. manufactures machine parts for aircraft engines. The CEO, Chucky Valters, was considering an offer from a subcontractor who would provide 2,400 units of product PQ107 for Valters for a price of $150,000. If Quirch does not purchase these parts from the subcontractor it must produce them in-house with the following costs:

Costs per unit

Direct materials $31

Direct labor 19

Variable overhead 8

Fixed overhead 10 (Allocated and unavoidable, except for $10,800 below)

In addition to the above costs, if Valters produces part PQ107, he would also have a retooling and design cost of $10,800. The relevant costs of producing 2,400 units of product PQ107 are calculated to be

A) $149,000.

B) $129,800.

C) $150,000.

D) $164,200.

E) $144,000.

25. Bilbo owned two adjoining restaurants, the Pork Palace and the Chicken Hut. Each restaurant was treated as a profit SBU for performance evaluation purposes. Although the restaurants had separate kitchens, they shared a central baking facility. The principal costs of the baking area included depreciation and maintenance on the equipment, materials, supplies, and labor.

Bilbo allocated the monthly costs of the baking facility to the two restaurants based on the number of tables served in each restaurant during the month. In April, the costs were $32,000, of which $16,000 were fixed. The Pork Palace served 4,400 tables, while the Chicken Hut served 3,600 tables.

The amount of the joint cost that should have been allocated to the Pork Palace in April is calculated to be:

A) $6,400.

B) $7,200.

C) $8,000.

D) $8,800.

E) $9,600.

26. A company has two divisions, X and Y, each operated as a profit center. X charges Y $55 per unit for each unit transferred to Y. Other data are:

X” variable cost per unit $ 40

X’s fixed cost $100,000

X’s annual sales to Y 5,000 units

X’s sales to outsiders 10,000 units

X is planning to raise its transfer price to $65 per unit. Division Y can purchase units at $50 each from outsiders, but doing so would idle X's facilities now committed to producing units for Y. Division X cannot increase its sales to outsiders. From the perspective of the company as a whole, from whom should Division Y acquire the units, assuming Y's market is unaffected?

A) Outside vendors.

B) Division X, but only at the variable cost per unit.

C) Division X, but only until fixed costs are covered, then should purchase from outside vendors.

D) Division X, regardless of the transfer price.

27. Division A, which is operating at capacity, produces a component, all of which sells in a perfectly competitive market for $25 per unit. At the current level of production, the fixed cost of producing this component is $8 per unit and the variable cost is $10 per unit. Division B would like to purchase this component from Division A. The price that Division A should charge Division B for this component is:

A) $10 per unit.

B) $18 per unit.

C) $20 per unit.

D) $25 per unit.

E) $8 per unit

28. A study has been conducted to determine if Product A should be dropped. Sales of the product total $200,000 per year; variable expenses total $140,000 per year. Fixed expenses charged to the product total $90,000 per year. The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped. These data indicate that if Product A is dropped, the company's overall net operating income would:

A) decrease by $20,000 per year.

B) increase by $20,000 per year.

C) decrease by $10,000 per year.

D) increase by $30,000 per year.

29. Manor Company plans to discontinue a department that has a contribution margin of $25,000 and $50,000 in fixed costs. Of the fixed costs, $29,000 cannot be eliminated. The effect on the profit of Manor Company of discontinuing this department would be:

A) a decrease of $4,000.

B) an increase of $4,000.

C) a decrease of $25,000.

D) an increase of $25,000.

30. Products A, B, and C are produced from a single raw material input. The raw material costs $90,000, from which 5,000 units of A, 10,000 units of B, and 15,000 units of C can be produced each period. Product A can be sold at the split-off point for $2 per unit, or it can be processed further at a cost of $12,500 and then sold for $5 per unit. Product A should be:

A) sold at the split-off point, since further processing would result in a loss of $0.50 per unit.

B) processed further, since this will increase profits by $2,500 each period.

C) sold at the split-off point, since further processing will result in a loss of $2,500 each period.

D) processed further, since this will increase profits by $12,500 each period.