Finance

Q: A company produces two products, XX and YY, from a single raw material called Zub. Zub is purchased in 55-gallon drums, and the contents of one drum are sufficient to produce 30 gallons of XX and 15 gallons of YY. XX sells for $10.00 per gallon and YY sells for $30.00 per gallon. During the current period, the company used 400 drums of Zub to produce XX and YY. The cost of Zub was $90 per drum. Required: (1) If the cost of Zub is allocated to the XX and YY products on the basis of the number of gallons produced, how much of the total cost of the 400 drums should be charged to each product? (2) If the cost of Zub is allocated to the XX and YY products in proportion to their market values, how much of the total cost of the 400 drums should be charged to each product? (3) Which basis of allocating the cost is most likely to be used by the company?

Q: __________ is used to rank a company's products to determine which products represent the best use of the firm's resources, or, perhaps, to determine which products are to be eliminated. A) Value analysis B) Value engineering C) Financial analysis D) Product-by-value analysis E) Product cost justification

Q: In which stage of the product life cycle should product strategy focus on improved cost control? A) introduction B) growth C) maturity D) saturation E) inflation

Q: The analysis tool that helps determine what products to develop, and by what strategy, by listing products in descending order of their individual dollar contribution to the firm is A) decision tree analysis B) Pareto analysis C) breakeven analysis D) product-by-value analysis E) product life cycle analysis

Q: What information is contained in the roof of the House of Quality? A) what the customer wants B) what we can do C) competitive assessment D) how well what we do meets the customers wants E) relationship between the things we can do

Q: When should product strategy focus on forecasting capacity requirements? A) at the introduction stage of the product life cycle B) at the growth stage of the product life cycle C) at the maturity stage of the product life cycle D) at the decline stage of the product life cycle E) none of the above

Q: Regal Furniture Company allocates its indirect salaries of $22,500 on the basis of sales. Determine the indirect salaries allocated to Departments 1 and 2 using the following information. Dept.1 Dept.2 Combined Revenues from sales........ $182,000 $78,000 $260,000 Direct Salaries................. 42,250 22,750 65,000 Salaries allocated to Dept. 1 _______________ Salaries allocated to Dept. 2 _______________

Q: A product's life cycle is divided into four stages, which are A) introduction, growth, saturation, and maturity B) introduction, growth, stability, and decline C) introduction, maturity, saturation, and decline D) introduction, growth, maturity, and decline E) none of the above

Q: Riu Corporation has a Parts Division that does work for other Divisions in the company as well as for outside customers. The company's Repair Division has asked the Parts Division to provide it with 2,000 special parts each year. The special parts would require $17.00 per unit in variable production costs. The Repair Division has a bid from an outside supplier for the special parts at $28.00 per unit. In order to have time and space to produce the special part, the Parts Division would have to cut back production of another part-the B83 that it presently is producing. The B83 sells for $34.00 per unit, and requires $22.00 per unit in variable production costs. Packaging and shipping costs of the B83 are $4.00 per unit. Packaging and shipping costs for the new special part would be only $0.50 per unit. The Parts Division is now producing and selling 10,000 units of the B83 each year. Production and sales of the B83 would drop by 10% if the new special part is produced for the Repair Division. Required: a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 2,000 special parts per year from the Parts Division to the Repair Division? b. Is it in the best interests of Riu Corporation for this transfer to take place? Explain.

Q: Which of the following would likely cause a change in market opportunities based upon levels of income and wealth? A) economic change B) sociological and demographic change C) technological change D) political change E) legal change

Q: In which stage of the product life cycle should product strategy focus on process modifications as the product is being fine-tuned for the market? A) introduction B) growth C) maturity D) decline E) none of the above

Q: In the process of preparing department income statements, a company uses there are three steps before the statements can be completed. Describe those steps.

Q: Operations managers must be able to anticipate changes in which of the following? A) product mix B) product opportunities C) the products themselves D) product volume E) all of the above

Q: Which of the following statements is not true? A) Virtually all of Honda's sales (autos, motorcycles, generators, lawn mowers) are based on its outstanding engine technology. B) Intel focuses on microprocessors. C) Michelin focuses on tires. D) Firms such as 3M establish goals for profitability from new products. E) Dell Computers provides fast delivery to customers, but, in return, customers may only select from a limited choice of hardware configurations.

Q: The three major subdivisions of the product decision are A) selection, definition, and design B) goods, services, and hybrids C) strategy, tactics, and operations D) cost, differentiation, and speed of response E) legislative, judicial, and executive

Q: Regal Marine A) no longer builds boats with any wooden parts B) designs and builds boat hulls by hand C) treats the product design decision as critical to its success D) gets its competitive advantage by being the low-cost producer of boats designed by others E) designs several new boats each year, but contracts other firms for their manufacture

Q: Which of these statements regarding Regal Marine is true? A) Product design is a critical decision for the firm. B) Regal uses a three-dimensional CAD system to shorten product development time. C) Regal still uses some wooden parts and hand-produces some components. D) Regal's use of CAD has resulted in a superior product. E) All of the above are true.

Q: The expected value of each course of action in a decision tree is determined by starting at the beginning of the tree (the left-hand side) and working toward the end of the tree (the right).

Q: What is an investment center and how is its performance evaluated?

Q: The moment-of-truth is the crucial moment between the service provider and the customer that exemplifies, enhances, or detracts from the customer's expectation.

Q: The customer may participate in the design of, and in the delivery of, services.

Q: An assembly chart shows an exploded view of the product, usually a three-dimensional or isometric drawing.

Q: An assembly drawing lists the operations necessary to produce the component.

Q: A work order is a listing of the components, their description, and the quantity of each required to make one unit of the product.

Q: What is a cost center and how is its performance evaluated?

Q: Group technology enables the grouping of parts into families based on similar processing requirements.

Q: What is a profit center and how is its performance evaluated?

Q: The "make-or-buy" decision distinguishes between what an organization chooses to produce and what it chooses to purchase from suppliers.

Q: Match the appropriate definition a through h with the following terms: A department whose manager is judged on the ability to generate revenues in excess of the department's costs. A department or unit that generates revenues and incurs costs, in which the manager is also responsible for investments made in operating assets. Set up to control costs and evaluate managers' performances by assigning costs to the managers responsible for controlling them. Compares actual and budgeted costs and expenses under the control of a manager. A department whose manager is judged on the ability to control costs by keeping them within a satisfactory range. A measure of departmental sales less direct expenses. __________ (1) Investment center __________ (2) Performance report __________ (3) Cost center __________ (4) Departmental contribution to overhead __________ (5) Profit center __________ (6) Responsibility accounting system

Q: The enhancement of existing products is an external product development strategy.

Q: Match the appropriate definition with the following terms: (a) A department or unit that incurs costs without directly generating revenues. (b) A department or unit that generates revenues and incurs costs, in which the manager is also responsible for investments made in operating assets. (c) Costs that are incurred for the joint benefit of more than one department and cannot be readily traced to only one department. (d) Costs readily traced to a specific department because they are incurred for the sole benefit of that department. (e) Costs incurred to produce or purchase two or more products at the same time. (f) Costs for which a manager has the power to determine or at least significantly affect. (g) A department that generates revenues and incurs costs. __________ (1) Direct expenses __________ (2) Profit center __________ (3) Controllable costs __________ (4) Indirect expenses __________ (5) Cost center __________ (6) Joint cost __________ (7) Investment center

Q: Rapidly developing products and moving them to the market is part of time-based competition.

Q: Two issuesviewing a product in terms of its impact on the entire economy and considering the life cycle of a productcombine to increase the likelihood of ethical decisions by managers.

Q: An operations manager's most ethical activity is to enhance productivity while delivering desired goods and services. Unfortunately, this activity is not environmentally sound.

Q: One environmentally friendly approach to product design is to use lighter components.

Q: Modular design exists only in tangible products; it makes no sense in services.

Q: Robust design is a method that ensures that small variation in production or assembly does not adversely affect the product.

Q: Division P of Launch Corporation has the capacity for making 75,000 wheel sets per year and regularly sells 60,000 each year on the outside market. The regular sales price is $100 per wheel set, and the variable production cost per unit is $65. Division Q of Launch Corporation currently buys 30,000 wheel sets (of the kind made by Division P) yearly from an outside supplier at a price of $90 per wheel set. If Division Q were to buy the 30,000 wheel sets it needs annually from Division P at $87 per wheel set, the change in annual net operating income for the company as a whole, compared to what it is currently, would be: A.$600,000 B.$225,000 C.$750,000 D.$135,000 E. $700,000

Q: Quality function deployment refers to first, determining what will satisfy the customer, and second, translating the customers' desires into a target design.

Q: Part 7B costs the Midwest Division of Frackle Corporation $30 to make, of which $21 is variable. Midwest Division sells Part 7B to other companies for $47. The Northern Division of Frackle Corporation can use Part 7B in one of its products. The Midwest Division has enough idle capacity to produce all of the units of Part 7B that the Northern Division would require. What is the lowest transfer price at which the Midwest Division should be willing to sell Part 7B to the Northern Division? A.$30 B.$21 C.$47 D.$17 E. $20

Q: Virtual reality technology can improve designs less expensively than the use of physical models or prototypes.

Q: Part AR3 costs the Southwestern Division of Luxon Corporation $26 to make-direct materials are $10, direct labor is $4, variable manufacturing overhead is $9, and fixed manufacturing overhead is $3. Southwestern Division sells Part AR3 to other companies for $30. The Northeastern Division of Luxon Corporation can use Part AR3 in one of its products. The Southwestern Division has enough idle capacity to produce all of the units of Part AR3 that the Northeastern Division would require. What is the lowest transfer price at which the Southwestern Division should be willing to sell Part AR3 to the Northeastern Division? A.$30 B.$26 C.$23 D.$27 E. $21

Q: Computer-aided design (CAD) refers to the use of specialized computer programs to direct and control manufacturing equipment.

Q: Division M makes a part that it sells to customers outside of the company. Data concerning this part appear below: Division O of the same company would like to use the part manufactured by Division M in one of its products. Division O currently purchases a similar part made by an outside company for $70 per unit and would substitute the part made by Division M. Division O requires 5,000 units of the part each period. Division M can sell every unit it produces on the outside market. What should be the lowest acceptable transfer price from the perspective of Division O? A.$75 B.$66 C.$16 D.$50 E. $25

Q: 3M's goal is to produce 30% of its profit from products introduced in the last 4 years.

Q: When the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred, then the lowest acceptable transfer price as far as the selling division is concerned is: A.variable cost of producing a unit of product. B.the full absorption cost of producing a unit of product. C.the market price charged to outside customers, less costs saved by transferring internally. D.the amount that the purchasing division would have to pay an outside seller to acquire a similar product for its use. E. all the costs of producing a unit of product.

Q: Relatively few new product ideas, perhaps only 1 in 250, become successfully marketed products.

Q: In the maturity stage of the product life cycle, operations managers will be concerned with adding capacity or enhancing existing capacity to accommodate the increase in product demand.

Q: Using the information below, compute the cycle efficiency: Process time 6.0 hours Inspections time .5 hours Move time .6 hours Wait time .9 hours Warehouse storage time 72.0 hours A.93.8%. B.81.3%. C.100.0%. D.75.0%. E.88.8%.

Q: The four phases of the product life cycle are incubation, introduction, growth, and decline.

Q: Using the information below, compute the manufacturing cycle time: Process time 6.0 hours Inspections time .5 hours Move time .6 hours Wait time .9 hours Warehouse storage time 72.0 hours A.7.5 hours. B.6.5 hours. C.8.0 hours. D.80.0 hours. E.7.1 hours.

Q: Political/legal change and economic change are both factors influencing market opportunities for new products.

Q: The objective of the product decision is to develop and implement a product strategy that meets the demands of the marketplace with a competitive advantage.

Q: A product strategy may focus on differentiation, low cost, or rapid response.

Q: Regal Marine's attempts to keep in touch with customers and respond to the marketplace are made impossible because consumer tastes change and maritime engineering improves.

Q: The following is a partially completed departmental expense allocation spreadsheet for Brickland. It reports the total amounts of direct and indirect expenses for its four departments. Purchasing department expenses are allocated to the operating departments on the basis of purchase orders. Maintenance department expenses are allocated based on square footage. Compute the amount of Maintenance department expense to be allocated to Fabrication. Purchasing Maintenance Fabrication Assembly Operating costs $32,000 $18,000 $96,000 $62,000 No. of purchase orders 16 4 Sq. ft. of space 3,300 2,700 A.$6,400. B.$9,900. C.$8,100. D.$9,000. E.$25,600.

Q: A company is deciding if it should do design of a product in-house or outsource the design. If outsourced the cost for a low bidder would be $40,000 and the cost for an expensive bidder $100,000. To do the design in-house would require over-time for an already stretched design team with total costs of $70,000. If all three designs (in-house, low bid, high bid) are equal in quality and the likelihood of finding a low bidder is 60% (meaning that 40% of the time the firm will have to hire the expensive bidder), should the company outsource design or do it in-house?

Q: A company looking for venture capitalist funding is deciding on the design of its operating system for its new phone. The first option is to simply buy the OS from another company. This would result in sales of either 10,000 units if the market is not crowded with similar phones or sales of only 3,000 units if the market is crowded. If the company decides to design its own OS the phone would have sales of 70,000 units if the OS was popular but sales of only 2,000 if the OS was a failure. Suppose that to recoup the cost of designing their own OS the company would need to sell twice as many phones as when they simply buy the OS for the profit from the scenarios to be equal. Which option should the company choose if the probability that the market is/ is not crowded is 50% and the probability that the OS is popular is 75%?

Q: Pleasant Hills Properties is developing a golf course subdivision that includes 250 home lots; 100 lots are golf course lots and will sell for $95,000 each; 150 are street frontage lots and will sell for $65,000. The developer acquired the land for $1,800,000 and spent another $1,400,000 on street and utilities improvement. Compute the amount of joint cost to be allocated to the street frontage lots using value basis. A.$1,920,000. B.$720,000. C.$1,620,800. D.$1,579,200. E.$1,080,000.

Q: A company is deciding if it should design an advertising system for use on Twitter. The first option is to skip out on designing, with no net costs or gains. The second option is System A, which would result in additional sales of either $50,000 under good conditions or $10,000 under bad conditions. The final choice is System B, which would increase sales by $20,000 under both good and bad conditions. Suppose that good conditions are twice as likely as bad conditions. Which option should the company pursue if developing a system costs $25,000?

Q: A company producing apps for a social networking site is deciding which path to pursue. The first is to create an app that has universal appeal but faces a crowded market. This app, A, would have sales of 100,000 copies at $1 each under ideal conditions, but under tough conditions would have sales of only 60,000 copies at $.80 each. The other app, B, would have sales of 500,000 units at $.50 each under ideal conditions but sales would be reduced to 10,000 units at $.50 each under tough conditions. If ideal and rough conditions occur with the same frequency, which app should the company produce? Note- both apps cost the same to develop.

Q: Holo Company reported the following financial numbers for one of its divisions for the year; average total assets of $5,800,000; sales of $5,375,000; cost of goods sold of $3,225,000; and operating expenses of $1,147,000. Assume a target income of 15% of average invested assets. Compute residual income for the division: A.$150,450. B.$196,750. C.$150,500. D.$133,000. E.$100,300.

Q: A swim club is designing a new pool to replace its old pool. The new pool would need to last for 10 years since the club is planning on relocating after 10 years. A concrete shell would cost $100,000 and last for all 10 years. Another option is to install a vinyl liner that would cost only $75,000 to install. However, the vinyl is not guaranteed to last for all 10 years, and has a 33% chance of breaking down. Repair of the vinyl would cost $40,000 and would extend the life of the vinyl liner to the 10 year mark. If both options are acceptable to the swim club, which one minimizes their cost?

Q: A company manufactures specialty pollution-sensing devices for the offshore oil industry. One particular device has reached maturity, and the company is considering whether to replace it with a newer model. Technologies have not changed dramatically, so the new device would have similar functionality to the existing one, but would be smaller and lighter in weight. The firm's three choices are: keep the old model; design a replacement device with internal resources; and purchase a new design from a firm that is one of its suppliers. The market for these devices will be either "receptive" or "neutral" of the replacement model. The financial estimates are as follows: Keeping the old design will yield a profit of $6 million dollars. Designing the replacement internally will yield $10 million if the market is "receptive," but a $3 million loss if the market is "neutral." Acquiring the new design from the supplier will profit $4 million under "receptive," $1 million under "neutral." The company feels that the market has a 70 percent chance of being "receptive" and a 30 percent chance of being "neutral." Draw the appropriate decision tree. Calculate expected value for all courses of action. What action yields the highest expected value?

Q: Tri-products is trying to decide whether to make-or-buy an accessory item for one of their products. It is projected that this item will sell for $10 each. If the item is outsourced, there is virtually no cost other than the $6 per unit that they would pay their supplier. Internally, they have two choices. Process A requires an investment of $120,000 for design and equipment, but results in a $4 per unit cost. Process B requires only a $100,000 investment, but its per unit cost is $5. Regardless of whether the item is subcontracted or produced internally, there is a 50% chance that they will sell 50,000 units, and a 50% chance that they will sell 100,000 units. Draw the decision tree appropriate to the alternatives and outcomes stated. Using decision trees and EMV, what is their best choice?

Q: If a company reports profit margin of 31.6% and investment turnover of 1.30 for one of its investment centers, the return on investment must be: A.24.3%. B.41.1%. C.32.9%. D.30.3%. E.4.11%.

Q: JDI, Inc. is trying to decide whether to make-or-buy a part (#J-45FPT). Purchasing the part would cost them $1.50 each. If they design and produce it themselves, it will result in a per unit cost of $0.75. However, the design investment would be $50,000. Further, they realize that for this type of part, there is a 30% chance that the part will need to be redesigned at an additional cost of $50,000. Regardless of whether they make-or-buy the part, JDI will need 100,000 of these parts. Using decision trees analysis and EMV, what should JDI do? Show the decision tree.

Q: Kragle Corporation reported the following financial data for one of its divisions for the year; average invested assets of $470,000; sales of $930,000; and income of $105,000. The investment turnover is: A.22.3. B.50.5. C.1.98. D.447.6. E.11.3.

Q: Identify the four methods of service design that can reduce costs and enhance the product.

Q: Briefly explain how Product Lifecycle Management (PLM) impacts product design.

Q: Dartford Company reported the following financial data for one of its divisions for the year; average investment center total assets of $3,500,000; investment center income $610,000; a target income of 12% of average invested assets. The residual income for the division is: A.$536,800. B.$1,030,000. C.$190,000. D.$683,200. E.$493,200.

Q: How does configuration management manifest itself when you ask for service on your automobile?

Q: Carter Company reported the following financial numbers for one of its divisions for the year; average total assets of $4,100,000; sales of $4,525,000; cost of goods sold of $2,550,000; and operating expenses of $1,372,000. Assume a target income of 10% of average invested assets. Compute residual income for the division: A.$203,000. B.$193,000. C.$150,500. D.$ 60,300. E.$197,500.

Q: Identify the external product development strategies; describe each in a sentence or two.

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