Cost Accounting: A Managerial Emphasis, 16e (Horngren) Chapter 12 Strategy, Balanced Scorecard, and Strategic Profitability Analysis Q&A

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Cost Accounting: A Managerial Emphasis, 16e (Horngren) Chapter 12 Strategy, Balanced Scorecard, and Strategic Profitability Analysis 12.1 Objective 12.1 1) Which of the following statements best d... efine strategy? A) It describes how an organization can create value for its customers while differentiating itself from its competitors. B) It is an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. C) It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors. D) It describes how an organization motivates its employees to work for more hours without any increase in their wages. Answer: A Diff: 2 Objective: 1 AACSB: Analytical thinking 2) In general, profit potential of an organization decreases with ________. A) lesser competition and stronger potential entrants B) greater competition and stronger potential entrants C) lesser competition and weaker potential entrants D) greater competition and weaker potential entrants Answer: B Diff: 2 Objective: 1 AACSB: Analytical thinking 3) Which of the following statements best define a product differentiation strategy? A) It describes how an organization can increase customer base by differentiating its' product prices from its competitors. B) It is an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. C) It describes how an organization can decrease product prices by differentiating its' raw materials from its competitors. D) It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors. Answer: D Diff: 2 Objective: 1 AACSB: Analytical thinking4) Which of the following focuses on these five factors: competitors, potential entrants to the market, equivalent products, bargaining power of customers, and bargaining power of suppliers? A) balanced scorecard B) product differentiation analysis C) industry analysis D) business process reengineering Answer: C Diff: 2 Objective: 1 AACSB: Analytical thinking 5) What is the term that describes an organization's ability to offer products or services that are perceived by its customers as being superior and unique relative to those of its competitors? A) Strategy B) Product differentiation C) Cost leadership D) The balanced scorecard Answer: B Diff: 1 Objective: 1 AACSB: Analytical thinking 6) What is the term for an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control? A) Marketing strategy B) Product differentiation C) Cost leadership D) Competitor differentiation Answer: C Diff: 1 Objective: 1 AACSB: Analytical thinking 7) An organization that is using the product differentiation approach would most likely do which of the following? A) focus on tight cost control to create a reputation of saving its customers money B) use innovative research and development and develop effective promotional campaigns to increase customer loyalty and charge higher prices C) provide products that are similar to competitors D) offer products at a lower cost than competitors Answer: B Diff: 2 Objective: 1 AACSB: Analytical thinking8) An organization that is using the cost leadership approach would ________. A) incur costs for innovative R&D B) provide products at a higher cost than competitors C) focus on productivity through efficiency improvements D) bring products to market rapidly Answer: C Diff: 2 Objective: 1 AACSB: Analytical thinking 9) Stewart Corporation plans to grow by offering a sound system, the SS3000, that is superior and unique from the competition. Stewart believes that putting additional resources into R&D and staying ahead of the competition with technological innovations is critical to implementing its strategy. Which of the following terms best describes Stewart's strategy? A) product differentiation B) scalability C) product leadership D) cost leadership Answer: A Diff: 2 Objective: 1 AACSB: Application of knowledge 10) Magic Corporation manufactures water toys. It plans to grow by producing high-quality water toys that are delivered in a timely manner. There are a number of other manufacturers who produce similar water toys. Magic believes that continuously improving its manufacturing processes and re-engineering processes to downsize and eliminate excess capacity are critical to implementing its strategy. Which of the following best describes Magic's strategy? A) product differentiation B) product leadership C) cost differentiation D) cost leadership Answer: D Diff: 2 Objective: 1 AACSB: Application of knowledge 11) Strategy describes how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its overall objectives. Answer: TRUE Diff: 1 Objective: 1 AACSB: Analytical thinking 12) One of the five forces of industry analysis is understand the bargaining power of customers. Answer: TRUE Diff: 1 Objective: 1 AACSB: Analytical thinking 13) Higher selling prices, rather than unique products or services, provide a competitive advantage for the cost leader companies. Answer: FALSE Explanation: Lower selling prices, rather than unique products or services, provide a competitive advantage for the cost leader companies. Diff: 1 Objective: 1AACSB: Analytical thinking 14) An organization which uses product differentiation strategy will charge higher prices. Answer: TRUE Diff: 1 Objective: 1 AACSB: Analytical thinking 15) The cost leadership strategy is for products and services that are similar to a competitors products and services. Answer: TRUE Diff: 1 Objective: 1 AACSB: Analytical thinking 16) The cost leadership strategy is best for a company if the engineering staff is more skilled at creatively designing new products than at making process improvements. Answer: FALSE Explanation: The cost leadership strategy is best for a company if the engineering staff is more skilled at making process improvements than at creatively designing new products. Diff: 2 Objective: 1 AACSB: Analytical thinking 17) Cost-leadership strategy usually focuses productivity and efficiency improvements , elimination of waste along with effective cost control systems. Answer: TRUE Diff: 2 Objective: 1 AACSB: Analytical thinking18) Bosely Corporation is reviewing its business strategy. The first step for Bosely is to perform an industry analysis. You have been hired to help the company go through the strategy formulation process. Required: To perform the industry analysis, what areas should Bosely focus on and give at least one example of how Bosely can effectively deal with each area. Answer: The industry analysis is composed of five areas: 1. Competitors - How competitive is the industry for Bosely's particular product ? They can differentiate the product to reduce competition. 2. Potential entrants to the market - How easy is it for new competitors to join the market? Create barriers to entry, such as high capital requirements. 3. Equivalent products - Is there a substitute product available? Make continuous product improvements to reduce likelihood of equivalent products. 4. Bargaining power of customers - How many suppliers can customers access? Try to negotiate long-term purchase agreements. 5. Bargaining power of input suppliers - How many raw material vendors are there? Try to find alternative suppliers and negotiate the best price for raw materials. Diff: 2 Objective: 1 AACSB: Analytical thinking 19) Explain the term cost leadership. What are the possible ways through which a company would try to become a cost leader? How far is it desirable to implement cost reduction measures? Answer: Cost leadership is an organization's ability to achieve lower costs relative to its competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. These companies provide products and services that are similar to—not differentiated from—their competitors, but at a lower cost to the customer. Lower selling prices, rather than unique products or services, provide a competitive advantage for these cost leaders. To achieve its cost-leadership strategy, companies would try to improve its own internal capabilities. It must enhance quality and also reengineer processes to downsize and eliminate excess capacity to reduce costs. At the same time, it is not desirable to implement cost reduction measures such as compromise in product quality, cuts in personnel etc, as these kind of measures would hurt company morale and hinder future growth. Diff: 3 Objective: 1 AACSB: Analytical thinking12.2 Objective 12.2 1) Which of the following involves a fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance? A) Strategy B) Product differentiation C) Product designing D) Reengineering Answer: D Diff: 1 Objective: 2 AACSB: Analytical thinking 2) Which of the following efforts would most likely yield the greatest re-engineering benefits? A) focusing on a single activity to determine if it is necessary B) decreasing quantity of output produced to increase total factor productivity C) increasing costs of all inputs used to increase total factor productivity D) focusing on entire processes and elimination of unnecessary activities and task Answer: D Diff: 2 Objective: 2 AACSB: Application of knowledge 3) The fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance, such as cost, quality, service, speed, and customer satisfaction is ________. A) directing B) controlling C) reengineering D) structuring Answer: C [Show More]

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