charter oak acc102 week 5 test part 1

1. Examples
of value-adding activities include all of the following except:

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2. Target costing is
directed toward:

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3. Which of the
following is not a prevention cost?

.

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4. All of the
following are components of the value chain except

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5. An effective JIT
system will include

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6. Which of the
following are considered value added activities by a manufacturer of
chocolate candies?

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Use the following to answer questions 7-9:

Tech Products, Inc. is interested in producing
and selling an improved widget. Market
research indicates that customers would be willing to pay $95 for such a
widget and that 50,000 units could be sold each year at this price. The current cost to produce the
widget is estimated to be $60.

7. Refer to the
information above. If Tech Products requires a 25% return on sales to
undertake production, what is the target cost for the new widget?

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8. Refer to the
information above. Tech has learned that a competitor plans to introduce a
similar widget at a price of $85. If
Tech requires a 25% return on sales, what is the target cost for the new
widget?

Answer

9. Refer to the
information above. At a price of $85, Tech’s market research indicates that
it can sell 40,000 units per year. Assuming
Tech can reach its new target cost, how will Tech’s profit at the $85 price
compare to what it would have earned in the absence of the competitor’s
product?

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10. The manufacturing efficiency ratio equals

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11. The following are all characteristics of
target costing EXCEPT:

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12. External failure costs include:

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Refer to the following to answer questions 13 –
15:

Company X has developed a new light for lighting swimming pools. After
doing market research, they have determined that customers would be willing
to pay $140 for this light. Company X seeks to earn 25% profit on the light.
At present Company X makes a similar style light for $101.25 which sells for
$130.

13. What must the target cost be in order to earn the 25% profit the
company demands?

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14. If Company X can adjust their costs to the
target cost, they estimate that they can sell 50,000 lights. What would their
profit be at this point?

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15. How many of the old style lights would they
have to sell to reach the same profit?

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