BUSI 601: ORGANIZATIONAL
STRATEGY & LEADERSHIP
◍ Cost relevant to a make versus buy decision include variable
manufacturing costs as well as Answer: Avoidable fixed costs
◍ employee morale and social responsibility represent two examples of
Answer: qualitative decision factors
◍ Determination of the optimum short-term product mix needs to
include an analysis of: Answer: production constraints
◍ In deciding whether to drop or keep a product line, all of the
following are relevant to the decision EXCEPT Answer: The level of
unavoidable fixed costs
◍ Lyman Company has the opportunity to increase annual credit sates
$100,000 by selling to a new. riskier group of customers. The expenses
of collecting credit sales are expected to be 15 percent of credit sales.
The company's manufacturing and selling expenses are
70% of sales, and its effective tax rate is 40%. If Lyman should accept
this opportunity, the company's after-tax profits would increase by:
Answer: 1. Incremental collection fees = 0.15 " increase In annual credit
sales = 0.15 " $100,000 = $15,000
2. Expected increase in after-tax profit= expected increase in pre-tax
profit x (1 -1). where t =income tax rate= ('increased revenue· increased
,collection fees· increased manufacturing & selling expenses) x (1-0.40)
= (($100,000- $15,000 -
$70,000) x( 0.60] = $9,000
◍ Many firms are finding it is difficult to compete successfully on cost
leadership or differentiation alone, and they must, in fact, compete on
both: Answer: Price and functionality.
◍ David Corporation manufactures a single product that has a cost of
$250. The company uses a 60% markup on manufacturing cost to arrive
al a selling price of $400, which results in a price that is higher than that
of the leading competitors. If David adopts the
approach known as target costing, the company will first Answer:
Obtain a better understanding of the competitors' prices
◍ Henry ford pioneer the use of Answer: target costing
◍ Which of the following is a common type of value engineering in
which the performance and cost of each major function or feature of the
product is examined? Answer: Functional analysis
◍ The theory of constraints (TOC) approach is strategically important In
dynamic markets because it leads to Answer: A more responsive and
flexible manufacturing environment
, ◍ The management accountant at Jang Manufacturing Co. collected the
following data in preparation for a lifecycle analysis on one of its
products, a leaf blower.
Average
Average
An nual Change Change Over Over the Last
Item This Year Last Year Four Years
Annual sales $3,200.000 -2.4% + 3.5o/o
Unit sales price 500 - 2.1% + 3.34!-
Unit profit '100 - 10.0o/o + 2.0
Total Profit 700.000 -1.2% + 3.0% Answer: decline
◍ which of the following are computer-based databases that include
comprehensive information about the firm's cost drivers? Answer: Cost
tables.
◍ During the sales life cycle, which is an example of what happens
during the introduction phase? Answer: Sales rise slowly as customers
become aware of the new product or service. Product variety is limited.
◍ Reduced time-lo-market, reduced expected service cost, and ease-of-
manufacture are critical success factors at which stage of the cost life
cycle? Answer: Product design
◍ As a strategic issue budget slack could represent a Answer: lower
overall level of expected performance than is achievable
STRATEGY & LEADERSHIP
◍ Cost relevant to a make versus buy decision include variable
manufacturing costs as well as Answer: Avoidable fixed costs
◍ employee morale and social responsibility represent two examples of
Answer: qualitative decision factors
◍ Determination of the optimum short-term product mix needs to
include an analysis of: Answer: production constraints
◍ In deciding whether to drop or keep a product line, all of the
following are relevant to the decision EXCEPT Answer: The level of
unavoidable fixed costs
◍ Lyman Company has the opportunity to increase annual credit sates
$100,000 by selling to a new. riskier group of customers. The expenses
of collecting credit sales are expected to be 15 percent of credit sales.
The company's manufacturing and selling expenses are
70% of sales, and its effective tax rate is 40%. If Lyman should accept
this opportunity, the company's after-tax profits would increase by:
Answer: 1. Incremental collection fees = 0.15 " increase In annual credit
sales = 0.15 " $100,000 = $15,000
2. Expected increase in after-tax profit= expected increase in pre-tax
profit x (1 -1). where t =income tax rate= ('increased revenue· increased
,collection fees· increased manufacturing & selling expenses) x (1-0.40)
= (($100,000- $15,000 -
$70,000) x( 0.60] = $9,000
◍ Many firms are finding it is difficult to compete successfully on cost
leadership or differentiation alone, and they must, in fact, compete on
both: Answer: Price and functionality.
◍ David Corporation manufactures a single product that has a cost of
$250. The company uses a 60% markup on manufacturing cost to arrive
al a selling price of $400, which results in a price that is higher than that
of the leading competitors. If David adopts the
approach known as target costing, the company will first Answer:
Obtain a better understanding of the competitors' prices
◍ Henry ford pioneer the use of Answer: target costing
◍ Which of the following is a common type of value engineering in
which the performance and cost of each major function or feature of the
product is examined? Answer: Functional analysis
◍ The theory of constraints (TOC) approach is strategically important In
dynamic markets because it leads to Answer: A more responsive and
flexible manufacturing environment
, ◍ The management accountant at Jang Manufacturing Co. collected the
following data in preparation for a lifecycle analysis on one of its
products, a leaf blower.
Average
Average
An nual Change Change Over Over the Last
Item This Year Last Year Four Years
Annual sales $3,200.000 -2.4% + 3.5o/o
Unit sales price 500 - 2.1% + 3.34!-
Unit profit '100 - 10.0o/o + 2.0
Total Profit 700.000 -1.2% + 3.0% Answer: decline
◍ which of the following are computer-based databases that include
comprehensive information about the firm's cost drivers? Answer: Cost
tables.
◍ During the sales life cycle, which is an example of what happens
during the introduction phase? Answer: Sales rise slowly as customers
become aware of the new product or service. Product variety is limited.
◍ Reduced time-lo-market, reduced expected service cost, and ease-of-
manufacture are critical success factors at which stage of the cost life
cycle? Answer: Product design
◍ As a strategic issue budget slack could represent a Answer: lower
overall level of expected performance than is achievable
