Which one of the following is an attractive and effective way to reduce the production, marketing, and other costs of entry-level cameras and help achieve a low-cost competitive advantage over rival companies based on lower overall costs per entry-level camera sold?Explain.

Which one of the following is an attractive and effective way to reduce the production, marketing, and other costs of entry-level cameras and help achieve a low-cost competitive advantage over rival companies based on lower overall costs per entry-level camera sold?

Trying several different “what-if” entries for core components to be used in entry-level cameras in order to discover the lowest cost combination for achieving the target P/Q rating

Spending less than $500,000 annually for Corporate Social Responsibility and Citizenship initiatives

Producing an entry-level camera with a P/Q rating of 1/2-star

Investing in robotic assembly equipment to reduce the number of PATs needed to assemble cameras and thus lower labor costs per camera assembled at the company’s Taiwan plant

Keeping the annual base wage per PAT member below $17,500.

The benefits of pursuing a strategy of social responsibility and corporate citizenship include

the boost such a strategy gives to increasing the company’s global sales volume and global market share of entry-level and multi-featured cameras.

the positive impact that such a strategy can have on the company’s image rating if the company spends a meaningful amount on socially responsible activities over a multi-year period.

the enhanced profitability that results when a company opts to spend money on socially responsible activities.

the boost such a strategy gives to the company’s stock price.

the positive impact that such a strategy has on the company’s P/Q ratings for entry-level and multi-featured cameras.

According to the depreciation rates used by the company and described in the Production Cost Report, if a company adds 50 new workstations at a cost of $75,000 each and also spends $10 million for an addition to its assembly plant to accommodate the new workstations, then its annual depreciation costs will rise by

$700,000.

$550,000.

$3,500,000.

$1,750,000.

$17,500,000.

Assume a company’s Income Statement for a given quarter is as follows:

Income Statement Data Quarter 1

(in 000s)

Sales Revenues $50,000

Production Costs 26,500

Delivery Costs 1,600

Marketing Costs 8,500

Administrative Expenses 2,000

Operating Profit 14,400

Net Interest 750

Income Before Taxes 13,650

Taxes 4,095

Net Income $9,555

Based on the above data, which of the following statements is false?

Delivery costs are 2.8% of revenues and represent the company’s smallest cost component

Marketing costs are 17.0% of revenues

Net interest costs are 1.5% of revenues

Production costs are 53% of revenues, thus resulting in a gross profit margin (sales revenues less costs of goods sold) of 47%

Administrative expenses are 4.0% of revenues

Given the following Financial Statement data:

Income Statement Data Quarter 1

(in 000s)

Sales Revenues $50,000

Operating Profit 14,400

Net Income $9,555

Balance Sheet Data

Total Current Assets $70,000

Total Assets 149,000

Total Current Liabilities 26,000

Debt Outstanding (draw against credit line) 45,000

Total Stockholders’ Equity 100,000

Other Financial Data

Depreciation $4,000

Dividend payments $2,250

Based on the above figures, the company’s capital structure (defined as the sum of total debt outstanding and total stockholder’s equity) consists of what percentages of debt and equity? The percentages of total capital invested that are debt-financed and equity-financed are among the factors used to determine a company’s credit rating, as explained in the Help section for the Comparative Financial Performances presented on p. 7 of the GLO-BUS Statistical Review.)

31% debt and 69% equity or 31:69

35% debt and 65% equity or 35:65

15% debt and 85% equity or 15:85

20% debt and 80% equity or 20:80

45% debt and 55% equity or 45:55

If a company earns net income of $38 million in Year 8, has 10 million shares of stock, pays a dividend of $1.50 per share, and has annual interest costs of $10 million, then

the company’s earnings per share would be $1.30 (net income of $38 million less dividend payments of $15 million less interest payments of $10 million = $13 million divided by 10 million shares).

the company’s earnings per share would be $2.30 (net income of $38 million less dividend payments of $15 million = $23 million divided by 10 million shares).

the company’s retained earnings for the year would be $28 million (net income of $38 million less interest payments of $10 million).

the company’s retained earnings for Year 8 would be $13 million (net income of $38 million less dividend payments of $15 million less $10 million in interest payments).

the company’s EPS for Year 8 would be $3.80 and its retained earnings for Year 8 would be $23 million (net income of $38 million less dividend payments of $15 million).

A company’s managers should probably give serious consideration to changing from a low-cost/low price strategy for entry-level cameras to a different strategy when

company managers prefer that their company’s total annual compensation per PAT member (as reported in the bottom section of p. 5 of the GSR) be above the industry-average in order to achieve high levels of PAT productivity.

most rival companies charging below-average prices for entry-level cameras are spending above-average amounts on quarterly advertising and have 90-day warranties on their entry-level cameras.

the company’s costs of producing and marketing entry-level cameras are above the industry-averages for many/most of the benchmarked cost categories reported on pp. 5-6 of the GSR and thus are unlikely to be competitive with other rivals that are charging low prices for entry-level cameras and are apparently pursuing a low-cost, low-price strategy.

when they prefer not to spend the capital required to invest in robotic assembly equipment that cuts the number of PATs needed to assemble cameras and lowers labor costs per camera assembled at the company’s Taiwan plant.

the number of PATs a company employs are NOT well above the industry-average (as reported in the bottom section of p.5 of the most recent GSR).

Which of the following is an action company co-managers should seriously consider in trying to improve the company’s credit rating? You may wish to consult the discussion of the credit rating that appears on the Help screen for the Comparative Financial Performance page of the GSR in answering this question.

Reduce the length of the warranty periods on entry-level cameras and multi-featured cameras to 90 days (so as to reduce warranty costs); use the warranty cost savings to fund increases in quarterly advertising in all 4 geographic regions–the resulting increases in net income and EPS will help improve the company’s credit rating

Repurchase the maximum number of shares allowed each year (which will help lower the amounts paid out in dividends and thus help boost the company’s free cash flows and year-end cash balances)

Cut the prices the company charges for both entry-level and multi-featured cameras by at least 15% in all four geographic regions in order to improve the company’s market shares and grow revenues, net income, EPS and ROE–all of which will help boost the company’s credit rating

Use the cash deposited in the company’s accumulated retained earnings account (see the company’s balance sheet) to pay back the loans outstanding on the company’s line of credit–this will lower interest costs

Strive to increase net income, which should help increase the company’s free cash flow (bigger free cash flows lower the number of years it takes to pay back the loans outstanding on the company’s line of credit)

The industry-low, industry-average, and industry-high cost benchmarks on pp. 5-6 of the latest issue of the GLO-BUS Statistical Review

are only valuable to the managers of companies whose costs are above the industry average for one or more of the benchmarked cost categories.

are of little value to company managers in making decisions to improve company performance in the upcoming decision round, although they may be of interest to those managers who are curious about competition in the prior year.

have the greatest value to the managers of companies that are considering increasing their company’s advertising expenditures and promotions in the upcoming decision round.

are of great value to the managers of companies whose costs are below the industry average for one or more of the benchmarked cost categories and are of minimal value to the managers of companies whose costs are above the industry averages.

aid managers in assessing whether their company’s costs for the benchmarked items are adequately competitive–when such is not the case, the company’s managers should promptly address how best to correct the high-cost problem(s).

Which one of the following actions is MOST likely to reduce the labor productivity of PATs?

Boosting the base pay of PAT members from 0% in the prior year by only 1% in the current year

Not raising the quarterly bonus for perfect attendance from $50 for a period of 3 years

Failing to pay PAT members enough so that the total annual compensation per full-time PAT member is at least equal to the industry-average compensation level (the industry-average compensation level is reported in the bottom section of p. 5 of the GLO-BUS Statistical Review)

Decreasing the size of the incentive bonus each PAT receives from $1.00 to $0.70 per camera assembled

Cutting the combined number of entry-level and multi-featured cameras being assembled from 6 models to 5 models

The most important or essential results from the latest decision round that company managers need to review/study in order to guide their strategic moves and decisions to improve their company’s competitiveness and rank among the top-performing companies in the upcoming decision round are

the dividend data and credit rating data on p. 7 of each issue of the GSR.

the two graphs at the bottom of p. 4 of each issue of the GSR.

the Quarterly Snapshot data in the top section of the Competitive Intelligence Report that shows each company’s competitive efforts (advertising, tech support, prices, P/Q ratings, promotional activities, and so on) in each geographic region.

the Industry Scoreboard on p. 1 of each issue of the GLO-BUS Statistical Review (GSR).

the strategic group maps for each geographic region that appear in the middle of each Quarterly Snapshot page in the Competitive Intelligence Report.

According to explanations provided on the Help screens for the Production Cost Report, if a company pays a PAT member a base wage of $18,000, a $60 quarterly bonus for perfect attendance, and annual fringe benefits of $2,500, if a PAT is paid a $1 incentive bonus per camera assembled, and if a PAT assembles 12,000 cameras per year (or 3000 cameras per quarter), then the annual compensation cost of a single PAT member and a fully-staffed PAT would be

$32,740 and $130,960.

$23,740 and $94,960.

$24,740 and $74,220.

$18,000 and $54,000.

$30,240 and $120,960.

In which one of the following circumstances should managers seriously consider shifting away from pursuit of a strategy to differentiate its highly-rated, premium-priced entry-level cameras from the entry-level cameras of rival companies?

When many rival companies are spending above-average amounts on quarterly advertising

When one or more rivals produce and market entry-level cameras with only a 1-star P/Q rating

When the company’s image rating falls below 70

When a big fraction of the companies in the industry are offering entry-level camera buyers 3 or fewer models with P/Q ratings of 2 1/2-stars or lower and are spending above-average amounts on tech support in all four geographic regions

When one or more rivals produce and market four or more models of entry-level cameras

Which one of the following actions is usually a dependable and appealing way for managers to try to boost their company’s EPS?

Repurchase shares of the company’s common stock

Minimize the company’s dividend payments so as to boost retained earnings–higher retained earnings divided by the number of shares outstanding result in higher EPS

Cut the company’s selling prices for both entry-level and multi-featured cameras to levels close to the lowest prices being charged by any company in all four regions; the resulting increases in sales volumes and revenues will boost the company’s EPS

Strive to be the dominant provider of entry-level cameras in all four geographic regions every year; the added profits on entry-level camera sales will drive increases in EPS

Issue enough additional shares of stock to raise sufficient cash to pay off all of the company’s borrowings on its line of credit; this will cut interest costs to zero and boost the company’s EPS

Which of the following actions is unlikely to help make a company’s multi-featured camera offering more competitive vis-à-vis the brands of rival firms?

Increasing advertising expenditures in two or more geographic regions

Boosting the number of models of multi-featured camera models in the company’s product line from 3 to 5

Increasing the value of the fringe benefit package per full-time PAT member from $3200 to $3600 per year

Reducing the prices the company charges for its multi-featured cameras in all four geographic regions

Increasing the number of quarterly promotions of multi-featured cameras from 1 to 2 and increasing the promotional discount from 10% to 15%

Assume a company’s Income Statement for a given period has the following entries: Assume a company’s Income Statement for a given period has the following entries:

Assume a company’s Income Statement for a given period has the following entries:

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