Question 81. To improve customer profitability, companies should track:

81. To improve customer profitability, companies should track:

a. only the final invoice price of a sale

b. the volume of the products purchased by each customer

c. discounts taken by each customer

d. Both b and c are correct.

82. To improve customer profitability, companies should:

a. strictly enforce their volume-based price discounting policy

b. track discounts by customer

c. track discounts by sales person

d. Both b and c are correct.

83. A customer cost hierarchy categorizes costs related to customers into different cost pools on the basis of different:

a. types of cost drivers

b. benefits-received relationships

c. levels of cause-and-effect relationships

d. All of these answers are correct.

84. Costs incurred to process orders would MOST likely be classified as a:

a. customer output unit-level cost

b. customer batch-level cost

c. customer-sustaining cost

d. corporate-sustaining cost

85. Top management and general administration costs would MOST likely be classified as a:

a. customer output unit-level cost

b. customer batch-level cost

c. customer-sustaining cost

d. corporate-sustaining cost

86. The cost of visiting customers would MOST likely be classified as a:

a. customer output unit-level cost

b. customer batch-level cost

c. customer-sustaining cost

d. corporate-sustaining cost

87. Costs incurred to handle each unit sold would MOST likely be classified as a:

a. customer output unit-level cost

b. customer batch-level cost

c. customer-sustaining cost

d. corporate-sustaining cost

88. _______________ categorizes costs related to customers into different cost pools on the basis of either different classes of cost drivers or different degrees of difficulty in determining the cause-and-effect (or benefits-received) relationships.

a. Customer-profitability analysis

b. Customer revenues

c. Customer cost hierarchy

d. Price discounting

89. An advantage of using a bar chart to visualize customer profitability is that:

a. differences in commissions paid to sales persons stand out

b. loss customers stand out

c. trends in the volume of purchases become apparent

d. All of these answers are correct.

90. Customer actions will LEAST affect:

a. customer output unit-level costs

b. customer batch-level costs

c. customer-sustaining costs

d. distribution-channel costs

91. To reduce distribution-channel costs, a company could:

a. improve the efficiency of the ordering process

b. make fewer customer visits

c. eliminate distribution to retailers and only service wholesalers

d. All of these answers are correct.

92. Corporate-sustaining costs:

a. are common to all individual customers

b. have a clear cause-and-effect relationship with several cost-allocation bases

c. should be allocated for decisions regarding reducing customer costs

d. All of these answers are correct.

93. The allocation of corporate-sustaining costs is useful for:

a. evaluating the performance of salespersons with individual customer accounts

b. motivating distribution-channel management

c. focusing on the cause-and-effect relationships with the cost-allocation bases

d. None of these answers is correct.

94. If deciding whether to eliminate a distribution channel, allocating corporate-sustaining costs to distribution channels

a. helps define cost reduction possibilities

b. gives the misleading impression of potential cost savings

c. identifies administrative inefficiencies

d. evaluates the effectiveness of sales personnel

95. When corporate-sustaining costs are fully allocated to distribution channels, then the sum of the distribution-channel operating incomes is:

a. less than company-wide operating income

b. equal to company-wide operating income

c. greater than company-wide operating income

d. indeterminable

96. Corporate-sustaining costs should be allocated to:

a. motivate changes in customer behavior

b. evaluate distribution-channel managers

c. determine the selling price that will cover all costs

d. identify the most profitable customers

97. A common finding in many studies is that a high percentage of operating income is:

a. contributed by a small number of customers

b. contributed to evenly by most customers

c. the result of high discounting

d. the result of cooperative efforts by many low-volume customers

98. Loss-causing customers:

a. should be dropped

b. should be evaluated for ways to become profitable customers

c. should be retained because each customer adds to long-run profitability

d. do not exist because additional customer sales always increase profits

99. Customers are more valuable when they are all of the following EXCEPT:

a. well known in the community

b. expected to continue to do business with a company

c. in an industry with high-growth potential

d. require special attention on a regular basis

100. Dropping an unprofitable customer will:

a. eliminate long-run costs assigned to that customer

b. eliminate most short-run costs assigned to that customer

c. decrease long-run profitability

d. increase the potential to cross-sell other products that are more desirable

101. More insight into the static-budget variance can be gained by subdividing it into:

a. the sales-mix variance and the sales-quantity variance

b. the market-share variance and the market-size variance

c. the flexible-budget variance and the sales-volume variance

d. a cost hierarchy

102. The static-budget variance will be favorable when:

a. actual unit sales are less than budgeted unit sales

b. the actual contribution margin is greater than the static-budget contribution margin

c. the actual sales mix shifts toward the less profitable units

d. the composite unit for the actual mix is greater than for the budgeted mix

103. More insight into the sales-volume variance can be gained by subdividing it into:

a. the sales-mix variance and the sales-quantity variance

b. the market-share variance and the market-size variance

c. the flexible-budget variance and the market-size variance

d. a cost hierarchy

104. The budgeted contribution margin per composite unit for the budgeted mix can be computed by dividing the:

a. total budgeted contribution margin by the actual total units

b. total budgeted contribution margin by the total budgeted units

c. actual total contribution margin by the total actual total units

d. actual total contribution margin by the total budgeted units

105. The sales-mix variance results from a difference between the:

a. actual market share and the budgeted market share

b. actual contribution margin and the budgeted contribution margin

c. budgeted contribution margin per composite unit for the actual mix and the budgeted contribution margin per composite unit for the budgeted mix

d. actual market size in units and the budgeted market size in units

106. The sales-mix variance will be unfavorable when:

a. the actual sales mix shifts toward the less profitable units

b. the composite unit for the actual mix is greater than for the budgeted mix

c. actual unit sales are less than budgeted unit sales

d. the actual contribution margin is greater than the static-budget contribution margin

107. The sales-mix variance will be favorable when:

a. the actual contribution margin is greater than the static-budget contribution margin

b. actual unit sales are less than budgeted unit sales

c. the actual sales mix shifts toward the less profitable units

d. the composite unit for the actual mix is greater than for the budgeted mix

108. An unfavorable sales-mix variance would MOST likely be caused by:

a. a new competitor providing better service in the high-margin product sector

b. a competitor having distribution problems with high-margin products

c. the company offering low-margin products at a higher price

d. the company experiencing quality-control problems that get negative media coverage of low-margin products

109. A shift towards a mix of products with a lower contribution margin per unit will MOST likely result in a(n):

a. unfavorable sales-mix variance

b. unfavorable sales-quantity variance

c. favorable sales-mix variance

d. favorable sales-quantity variance

110. The sales-quantity variance will be unfavorable when:

a. the composite unit for the actual mix is greater than for the budgeted mix

b. actual unit sales are less than budgeted unit sales

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