Chapter 1 problem review
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Chapter 1 problem review

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Chapter 1 problem review Chapter 1 problem review Presentation Transcript

  • This presentation includes: Exercises 1-18, 1-21 Problem 1-25 © 2012 Pearson Prentice Hall. All rights reserved. 1-1
  • Exercise 1-18 Value chain and classification of costs Classify each of the cost items (a–h) as one of the business functions of the value chain shown in Exhibit 1-2 (p. 6). Burger King, a hamburger fast food restaurant, incurs the following costs: a. Cost of oil for the deep fryer a. Production b. Wages of the counter help who give customers the food they order b. Production c. Cost of the costume for the King on the Burger King television commercials c. Marketing d. d. Cost of children’s toys given away free with kids’ meals © 2012 Pearson Prentice Hall. All rights reserved. Marketing 1-2
  • Value chain and classification of costs e. Cost of the posters indicating the special “two cheeseburgers for $2.50” e. Marketing f. Costs of frozen onion rings and French fries f. Production g. Salaries of the food specialists who create new sandwiches for the restaurant chain g. Design of products and processes (or Research and Development) h. Cost of “to-go” bags requested by customers who could not finish their meals in the restaurant h. Customer service © 2012 Pearson Prentice Hall. All rights reserved. 1-3
  • Exercise 1-21 Five-step decision-making process, manufacturing Garnicki Foods makes frozen dinners that it sells through grocery stores. Typical products include turkey dinners, pot roast, fried chicken, and meat loaf. The managers at Garnicki have recently introduced a line of frozen chicken pies. They take the following actions with regard to this decision. Classify each action (a-g) as a step in the five-step decision-making process (identify the problem and uncertainties, obtain information, make predictions about the future, choose among alternatives, implement the decision, evaluate performance, and learn). © 2012 Pearson Prentice Hall. All rights reserved. 1-4
  • Five-step decision-making process a. Garnicki performs a taste test at the local shopping mall to see if consumers like the taste of its proposed new chicken pie product. Obtain information b. Garnicki sales managers estimate they will sell more meat pies in their northern sales territory than in their southern sales territory. Make predictions about the future c. Garnicki managers discuss the possibility of introducing a new product. Identify the problem and uncertainties © 2012 Pearson Prentice Hall. All rights reserved. 1-5
  • Five-step decision-making process d. Garnicki managers compare actual costs of making chicken pies with their budgeted costs. Implement the decision, evaluate performance, and learn e. Costs for making chicken pies are budgeted. Make predictions about the future f. Garnicki decides to make chicken pies. Make decisions by choosing among alternatives g. The purchasing manager calls a supplier to check the prices of chicken. Obtain information © 2012 Pearson Prentice Hall. All rights reserved. 1-6
  • Problem 1-25 Strategic decisions and management accounting A series of independent situations in which a firm is about to make a strategic decision follow. 1. For each decision, state whether the company is following a low price or a differentiated product strategy. 2. For each decision, discuss what information the management accountant can provide about the source of competitive advantage for these firms. © 2012 Pearson Prentice Hall. All rights reserved. 1-7
  • a. Roger Phones is about to decide whether to launch production and sale of a cell phone with standard features. Low price strategy Cost to manufacture and sell the cell phone Productivity, efficiency and cost advantages relative to competition Prices of competitive cell phones Sensitivity of target customers to price and quality The production capacity of Roger Phones and its competitors © 2012 Pearson Prentice Hall. All rights reserved. 1-8
  • b. Computer Magic is trying to decide whether to produce and sell a new home computer software package that includes the ability to interface with a sewing machine and a vacuum cleaner. There is no such software currently on the market. Differentiated product strategy Cost to develop, produce and sell new software Premium price that customers would be willing to pay due to product uniqueness Price of basic software Price of closest competitive software Cash needed to develop, produce and sell new software © 2012 Pearson Prentice Hall. All rights reserved. 1-9
  • c. Christina Cosmetics has been asked to provide a “store brand” lip gloss that will be sold at discount retail stores. Low price strategy Cost of producing the “store-brand” lip gloss Productivity, efficiency and cost advantages relative to competition Prices of competitive products Sensitivity of target customers to price and quality How the market for lip gloss is growing © 2012 Pearson Prentice Hall. All rights reserved. 1-10
  • d. Marcus Meats is entertaining the idea of developing a special line of gourmet bologna made with sun dried tomatoes, pine nuts, and artichoke hearts. Differentiated product strategy Cost to produce and sell new line of gourmet bologna Premium price that customers would be willing to pay due to product uniqueness Price of basic meat product Price of closest competitive product © 2012 Pearson Prentice Hall. All rights reserved. 1-11
  • © 2012 Pearson Prentice Hall. All rights reserved. 1-12