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Cost and Quality Management – Answers to Assignment VI

1.Productivity can be thought of as:
A)the relationship between what is produced and what is required to produce it.
B)doing more with less.
C)the ratio of output to input.
D)only A and C are correct.
E)answers A, B and C are all correct.

2.A primary objective in measuring productivity is to improve operations either by using fewer inputs to produce the same output, or to produce:
A)more quickly.
B)more effectively.
C)with fewer constraints.
D)more outputs with the same inputs.
E)more outputs with more inputs.

3.The experience of many firms is that improvements in quality:
A)decrease productivity.
B)have no significant effect on productivity.
C)first increase, and then decrease productivity.
D)increase productivity.
E)restrict productivity improvements.

4.Efforts to improve productivity should be focused only on:
A)quality.
B)non-value added activities.
C)value added activities.
D)inputs.
E)outputs.

5.One major problem in measuring the productivity of a not-for-profit organization is the absence of:
A)costs.
B)a common measure for its outputs.
C)mandatory financial reporting.
D)labor costs.
E)None of the above answers is correct.

6.The two major contributing factors to a sales volume variance are deviations in:
A)market size and market share.
B)market size and sales quantity.
C)sales mix and selling price.
D)sales mix and sales quantity.
E)sales price and sales quantity.

7.An unfavorable sales mix variance arises for a product when:
A)the actual unit sold is greater than the budgeted unit to be sold.
B)the actual unit sold is less than the budgeted unit to be sold.
C)the actual sales-mix percentage is less than the budgeted sales-mix percentage.
D)the budgeted sales-mix percentage is less than the actual sales-mix percentage.
E)the total actual sales dollar from the product is less than the budgeted sales dollar for the product.

8.When the actual sales-mix shifted towards a mix of products with lower contribution margins, the firm will have negative effect(s) on:
A)sales mix and sales quantity variances.
B)sales quantity ansd sales volume variances.
C)sales volume and market mix variances.
D)market mix and sales mix variance.
E)Sales mix and sales volume variances.

9.When the mix of products sold shifted towards the high contribution
margin product,
A)the total sales mix variance is favorable.
B)the total sales volume variance is favorable.
C)the total market mix variance is favorable.
D)the total sales mix variance is unfavorable.
E)the total sales price variance is favorable.

10.Market size variance arises because of changes:
A)in the total market sizes of the firm’s product.
B)of the firm’s proportion in the total market.
C)in the access of the firms competing in the market.
D)in units sold.
E)in the firm’s total sales volume.

11. Decreasing selling prices in order to secure higher sales volumes or market shares:
A)will usually generate higher sales volumes and market shares.
B)can have negative impact on a firm’s profitability.
C)should not usually affect profitability.
D)should not usually affect contribution margins.
E)should not usually affect sales mix.

12.A decrease in a firm’s market shares should alert the management to the erosion of the firm’s competitive position and encroachment of:
A)costs increases.
B)price decreases.
C)competitors.
D)suppliers.
E)taxes.

13.A firm with a declining market share percentage may still earn a higher operating income if the:
A)market as a whole is also declining.
B)market as a whole is stable.
C)market as a whole is shifting.
D)market as a whole is growing.
E)firm reduces operating costs.

14.Sales volume variances can have significant implications for strategic management. It may indicate that the market:
A)may be smaller than originally planned.
B)mix is different than initial estimates.
C)is stronger than previously thought.
D)needs a more aggressive strategy.
E)all of the above.

15.In analyzing factors attributable to the change in a firm’s operating income from one year to the next, which of the following effect(s) may be included in the price-recovery factor?

| Revenue Effect| Cost Effect|
A)| Yes| Yes|
B)| Yes| No|
C)| No| Yes|
D)| No| No|

16.In analyzing factors attributable to the change in a firm’s operating income from one year to the next, which of the following effect(s) may be included in the growth factor?

| Revenue Effect| Cost Effect|
A)| Yes| Yes|
B)| Yes| No|
C)| No| Yes|
D)| No| No|

17.In analyzing the change in a firm’s operating income from one year to the next, which of the following factors measures the change attributable solely to the change in the quantity of inputs spent in year 2 relative to the quantity of inputs that would have been used in year 1 to produce the
year 2 output?

A)Growth.
B)Price-recovery.
C)Productivity.
D)Cost effect.
E)Purchase price.

18.Which of the following factor(s) is (are) likely to be significant for a firm with a successful cost leadership strategy?
A)growth and price-recovery.
B)growth and productivity.
C)price-recovery and productivity.
D)growth only.
E)Price-recovery only.

19.Which of the following factor(s) is (are) likely to be significant for a firm with a successful differentiation strategy?
A)growth and price-recovery.
B)growth and productivity.
C)price-recovery and productivity.
D)productivity only.
E)Price-recovery only.

Use the following to answer questions 20-22:

Gutsen Communications Inc. manufactures a scrambling device for cellular phones. The main component of the scrambling device is a very delicate part — DTV-12. DTV-12 requires careful handlings during manufacturing. Once damaged, the part must be discarded. Only skilled laborers are hired to manufacture and install DTV-12. Damages still occur, however. The following are the operating data of Gutsen Communications Inc. for 2005 and 2006.

| 2006| 2005|
Units manufactured | 600,000| 780,000|
Units of DTV-12 used| 960,000| 1,072,500|
Direct labor hours worked| 180,000| 260,000|
Cost of DTV-12 per unit| 180,000| 260,000|
Direct labor wage rate per hour| $67| $82|

20.The operational partial productivity ratio of DTV-12 in 2005 is:
A)0.73 per unit.
B)0.63 per unit.
C)1.92 per unit.
D)3.33 per unit.
E)3.00 per unit.

21.The direct labor operational partial productivity ratio for 2006 is:
A)0.73 per unit.
B)0.63 per unit.
C)1.92 per unit.
D)3.00 per unit.
E)3.33 per unit.

22.The financial partial productivity ratio of DTV-12 in 2006 is:
A)2.3459.
B)0.4156.
C)0.3342.
D)3.6585.
E)4.9751.

Use the following to answer questions 23-136:

Nap Co. had two products code named X and Y. The firm had the following master budget for the year just completed:

The following operating results were reported after the year was over.

| Product X| | Product Y| Total|
Sales | $300,000| | $384,000| $684,000|
Variable costs| 200,000| | 168,000| 368,000|
Contribution margin| $100,000| | $216,000| $316,000|
Fixed costs| 140,000| | 108,000| 248,000|
Operating income| ($40,000| )| $108,000| $ 68,000|
Units sold| 2,500| | 6,000| |

23. The operating income flexible budget variance for Product X is:
A)$ 4,000 unfavorable.
B)$14,000 unfavorable.
C)$20,000 unfavorable.
D)$30,000 unfavorable.
E)$40,000 unfavorable.

24.The operating income sales volume variance for Product X is:
A)$25,000 unfavorable.
B)$26,000 favorable.
C)$30,000 unfavorable.
D)$40,000 unfavorable.
E)$65,000 favorable.

25.The selling price variance for Product X is:
A)$40,000 unfavorable.
B)$30,000 unfavorable.
C)$25,000 unfavorable.
D)- 0 –
E)$40,000 favorable.

26.The sales mix variance for Product X is:
A)$13,312.50 favorable.
B)$18,353 favorable.
C)$19,500 favorable.
D)$68,824 favorable.
E)$73,125 favorable.

27.The sales quantity variance for Product X is:
A)$ 4,437.50 favorable.
B)$ 5,221 favorable.
C)$ 6,500 favorable.
D)$ 7,647 favorable.
E)$16,250 favorable.

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