Ch5 Exam Questions + Strategic Planning Regarding Operating

Chapter 5

Strategic Planning Regarding Operating Processes

MATCHING

1. Match the following terms with the descriptions below.

A. Monopolistic competition

B. Monopoly

C. Oligopoly

D. Pure competition

_____ 1. A company that has exclusive control over a product, service, or geographic

market.

_____ 2. An environment in which a large number of sellers produce and distribute

virtually identical products and services.

_____ 3. An environment in which there are many companies whose product/services

are similar but not identical.

_____ 4. An environment in which a few firms control the types of products and services

and their distribution.

3. Match the following terms with the business described below.

A. Monopolistic competition

B. Monopoly

C. Oligopoly

D. Pure competition

_____ 1. Corn farmer in Iowa

_____ 2. Cable TV in a smaller city

_____ 3. NFL football teams

_____ 4. Clothing designer

_____ 5. Soft drink companies

_____ 6. Oil companies

_____ 7. Automobile companies

_____ 8. Local coffee shop

Answers: 1. D; 2. B; 3. C; 4. D; 5. A; 6. C; 7. A; 8. D

4. Match the following terms with the descriptions below.

A. Commission pay

B. Bonus

C. Hourly pay

D. Net pay

E. Piece-rate pay

F. Gross pay

G. Salary pay

_____ 1. The employee’s take-home pay.

_____ 2. Payment for services rendered based on the number of items completed.

_____ 3. A fringe benefit based on the occurrence of some future event.

_____ 4. The full amount an employee earns.

_____ 5. Payment for services rendered based on hours worked.

_____ 6. Payment for services rendered based on a fixed set of time.

_____ 7. Payment for services rendered based on a percentage of revenue generated.

5. Match the following terms with the descriptions below.

A. Markup

B. Dumping

C. Life-cycle pricing

D. Penetrating pricing

E. Predatory pricing

F. Price fixing

G. Price gouging

H. Selling margin

I. Target pricing

J. Skimming pricing

_____ 1. A pricing strategy in which the company first determines the selling price of

the product and then decides whether to enter the market

_____ 2. The practice of setting excessively high prices

_____ 3. Selling products below cost in a foreign market

_____ 4. A pricing strategy in which the company sets its initial selling price high in an

attempt to appeal to those individuals who want to be the first to have the

product and who are not concerned about price

_____ 5. When a group of companies agree to limit supply and charge identical prices

_____ 6. Selling price less cost

_____ 7. A pricing strategy in which a company sets its initial selling price low in an

attempt to gain a share of the market from competitors

_____ 8. The practice of selling products below cost in an attempt to drive out

competition, control the market, and then raise prices

_____ 9. An additional amount over cost that is added to determine selling price

_____10. A pricing strategy in which the company attempts to set a selling price that will

cover the costs of the product over its life.

6. Match the following terms with the descriptions below.

A. Daily demand

B. Kanban system

C. Lead time

D. Quantity discount

E. Reorder point

F. Stockout cost

G. Safety stock

_____ 1. Inventory level when order for more inventory is made

_____ 2. The amount of inventory to meet daily needs

_____ 3. Inventory held to prevent a stockout

_____ 4. An inventory system that uses cards to identify when more inventory is needed

_____ 5. The time between when an order is placed and when the inventory is received

_____ 6. The reduction in price a firm receives when it places a large order

_____ 7. The opportunity cost of not having inventory on hand when it is needed

7. Which of the following is not one of the perspectives that compose the balanced scorecard approach?

A) Financial

B) Internal processes

C) Learning and growth

D) Flexibility and efficiency

8. The four primary influences on selling price are:

A) product, variable costs, fixed costs, and mixed costs.

B) customers, competition, legal and social issues, and costs.

C) competition, variable costs, fixed costs, and mixed costs.

D) legal constraints, government regulations, costs and customers.

10. In general, which of the following is true about the pricing of products?

A) When supply increases prices increase.

B) When demand decreases prices increase.

C) When supply decreases prices increase.

D) When demand increases prices increase.

11. The type of environment in which a large number of sellers produce and distribute virtually identical products and services is referred to as:

A) monopolistic competition.

B) oligopolistic competition.

C) price competition.

D) pure competition.

12. Which of the following business are considered part of monopolistic competition?

A. Power company

B. Athletic shoe company

C. Oil company

D. Fruit farmer

13. Which of the following business is considered part of an oligopoly?

A. Automobile manufacturers

B. Oil companies

C. Wheat farmer

D. Insurance companies

14. The seller of a product is a price taker in which of the following environment?

A) Monopolistic competition

B) Pure competition

C) Monopoly

D) Oligopoly

15. Which of the following is not involved in pure competition?

A) Cotton farmer in Texas

B) National Basketball Association franchise

C) Starbucks

D) Macy’s

16. The pricing strategy where a company initially sets the price of its product low and then raises it later on in the product’s life cycle is called:

A) price skimming.

B) target pricing.

C) life-cycle pricing.

D) penetration pricing.

17. Life-cycle pricing:

A) attempts to establish a price that can be maintained throughout the life of the product.

B) sets the price high to begin with and then lowers it later on in the life of the product.

C) sets the price low to begin with and then raises it later on in the life of the product.

D) is the same as target pricing.

18. Panascope manufactures high-definition TVs (HDTVs). It costs Panascope $1,500 to produce one HDTV. Panascope, planning to "make hay while the sun shines," has priced its HDTVs at $12,000. This is an example of which pricing strategy?

A) Penetration pricing

B) Life-cycle pricing

C) Price skimming

D) Pioneer price

19. When the iPhone was introduced, its price was set by which of the following?

A) Bonus pricing

B) Life-cycle pricing

C) Penetrating pricing

D) Skimming pricing

20. Model bakers have developed a snack cake that it wants to compete with Hostess

Twinkies and has set their introductory price 10 cents below the price of a Twinkie. This

is an example of which of the following?

A) Penetrating pricing

B) Skimming pricing

C) Life-cycle pricing

D) Competitive cycle pricing

21. Which of the following best describes the competitive environment for Microsoft Windows?

A) Monopolistic competition

B) Pure competition

C) Oligopoly

D) Monopoly

22. Which of the following best describes the competitive environment for Sony high-definition TVs?

A) Monopolistic competition

B) Pure competition

C) Free competition

D) Monopoly

23. Mobile phone providers that offer no- or low-cost phones when customers sign up for service is an example of which pricing strategy?

A) Penetration pricing

B) Pioneer price

C) Life-cycle pricing

D) Price skimming

24. If a product has a cost of $160 and a markup percentage of 60 percent, what is the selling margin of the product?

A) $256

B) $160

C) $96

D) Not enough information to calculate

25. If a product has a cost of the $250 and a selling price of $450, what is the products markup percentage?

A) 200 percent

B) 80 percent

C) 44.4 percent

D) Not enough information to calculate

26. Which of the following is not a factor when using target pricing?

A) Determining the price based on consumer surveys

B) Determining the markup necessary to get a satisfactory return to stockholders

C) Determining the price of competitors so our price will be lower

D) Determining the target cost and see if product can be produced for that amount.

27. Which of the following describes the practice of selling a product in other countries for a price less than the company’s cost?

A) Dumping

B) Predatory Pricing

C) Price Skimming

D) Penetrating Pricing

28. Which of the following describes the practice of setting the price of a product at less than cost to take over a market and then to raise the price?

A) Dumping

B) Price skimming

C) Penetrating pricing

D) Predatory pricing

29. Which of the following statements is false?

A) JIT is a pull system.

B) JIT is a short-run model.

C) The JIT philosophy is based on continuous improvement.

D) JIT requires a company to have strong relationships with its suppliers.

30. Which of the following statements is false?

A) JIT is a pull system.

B) The JIT philosophy is based on continuous improvement.

C) JIT requires a company to have strong relationships with its suppliers.

D) All of the above are true.

31. Which of the following is not a factor in the EOQ inventory model?

A) Annual demand for the inventory in units

B) Cost of the inventory item

C) Cost to place one additional order

D) Cost to carry one additional unit in inventory

32. Which of the following is not a factor in the EOQ inventory model?

A) Annual demand for the inventory in units

B) Cost to place one additional order

C) Cost to carry one additional unit in inventory

D) All of the following are factors in the EOQ model.

33. West Coast Creamery’s economic order quantity is 300 units. Demand for the year is 41,975 units. There are seven days between the time an order is placed and the day it is received. West Coast operates 365 days per year. The reorder point is:

A) 268 units

B) 805 units

C) 2,683 units

D) 2,905 units

34. Safety stock is kept in order to:

A) guard against defective products.

B) prevent losses created by a stockout.

C) prevent people from being injured by a dangerous inventor.

D) help identify the reorder point.

35. A reorder point in a Kanban system is identified by a:

A) card.

B) color-coded inventory item.

C) predetermined date.

D) pokemon.

36. Lead time in an inventory system is:

A) the time it takes to sell inventory.

B) the time it takes to move raw materials inventory from the warehouse to the manufacturing facility.

C) The time between placing an order for inventory and the when the inventory is received.

D) The time it takes to manufacture a product plus the time it takes to ship the product to the customer.

37. How are defective products handled in a JIT inventory system?

A) Defective inventory is stacked in a particular location.

B) Defective inventory is color-coded.

C) Defective inventory is marked down for consumers.

D) The production line is stopped and only started when the problem causing the defective product is identified.

38. Which of the following is not a key feature of a JIT inventory system?

A) Quality and reliable suppliers

B) Adequate safety stock

C) Well-trained employees

D) Customer demand pulls the system

39. Which of the following is a feature of a JIT inventory system?

A) Sufficient inventory on hand to meet unexpected demand.

B) Plan to sell slightly defective products to meet demand of bargain hunting

consumers.

C) Amount of production based on pull of consumer demand.

D) Plan to keep assembly line moving at all cost.

40. A compensation method under which a company pays employees according to the number of items they produce during a given time-period is known as

A) piece-rate pay.

B) deferred pay.

C) contract pay.

D) bonus pay.

41. A compensation method whereby employees are paid according to the amount they sell in a given time-period is known as

A) commission-based compensation.

B) piece-rate compensation.

C) deferred compensation.

D) bonus compensation.

42. Lockwood International’s president receives a bonus equal to 7 percent of net income. This bonus is included in the determination of net income. If the company’s income before the bonus was $4,500,000, the amount of the bonus is:

A) $294,393.

B) $315,000.

C) $338,710.

D) cannot be determined from the information given.

43. Capital Industries’ president receives a bonus equal to 6 percent of net income. This bonus is included in the determination of net income. If the company’s income before bonus was $3,800,000, the amount of the bonus is:

A) $215,094.

B) $228,000.

C) $242,553.

D) cannot be determined from the information given

44. Which of the following is withheld from an employee’s pay and also paid by the employer?

A) Income tax

B) Union dues

C) Vacation pay

D) Social Security

45. Which of the following is not withheld from the employee’s check?

A) Federal Unemployment Tax

B) Federal Income Tax

C) Social Security

D) Union dues

47. Which of the following is not withheld from the employee’s check?

A) Union dues

B) Federal Income Tax

C) Social Security

D) All of the above are withheld.

48. Which of the following companies would not be a good candidate for a JIT system?

A) Ford Motor Company

B) The GAP

C) A company that manufactures yachts

D) Dell computers

49. Which of the following companies would be a good candidate for a JIT system?

A) Grocery store

B) Macy’s

C) Construction company

D) Sporting Goods Store

50. It is said that one of the benefits of the Just-In-Time (JIT) system is that it can’t hide defective products. What does this mean?

51. What is the distinction between penetrating and predatory pricing?

52. Duracraft Industries’ president receives a bonus equal to 5% of income before taxes. This bonus is included in the determination of income before taxes. Assuming the company’s income before consideration of the bonus and taxes was $28,350,000, determine the amount of the president’s bonus.

53. Barton Corporation generated the following income:

Jackson Barton, the president of Barton Corporation, wants to establish a bonus system. If the tax rate is 30 percent, what is President Barton’s bonus under each of the three options that follow:

A. Bonus based on Income before Bonus and Taxes using a bonus rate of 6 percent.

54. Malsom Corp’s monthly payroll is $100,000. If the FICA rate is 7.65 percent, income tax is withheld at a 15% rate, the State Unemployment (SUTA) rate is 2.8 percent and the Federal Unemployment (FUTA) tax rate is 0.8 percent, how much is withheld from the workers’ wages and how much does Malsom have to pay in payroll taxes?

55. Zeigler Corp’s monthly payroll is $200,000. If the FICA rate is 7.65 percent, income tax is withheld at a 15 percent rate, the State Unemployment (SUTA) rate is 2.8 percent and the Federal Unemployment (FUTA) tax rate is 0.8 percent, how much is withheld from the workers’ wages and how much does Malsom have to pay in payroll taxes?

56. Julia B Enterprises generated the following income:

Julia Barton, the president of Julia B Enterprises, wants to establish a bonus system. If the tax rate is 30 percent, what is President Barton’s bonus under each of the three options that follow?

A. Bonus based on Income before Bonus and Taxes using a bonus rate of 6 percent.