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Chapter 25 - Answer - MANAGEMENT ACCOUNTING Solutions...

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MANAGEMENT ACCOUNTING - Solutions Manual CHAPTER 25 MANAGING PRODUCTIVITY AND MARKETING EFFECTIVENESS I. Questions 1. Productivity is the relationship between the output and the input resources required for generating the output. 2. A critical success factor for a firm that competes as a cost leader is to be the low cost provider. A low cost provider needs to perform the required tasks for the same output with fewer resources than its competitors. 3. Among criteria that often are used in assessing productivity and their advantages and disadvantages are: Using a prior year’s productivity as the criterion Advantages: Data readily available Facilitates monitoring of continuous improvements Disadvantages: Difficult to assess adequacy of productivity improvements Hard to compare productivity improvements between the years Using the best performance as the criterion Advantages: Provides as the benchmark the utmost performance Motivates people to strive for the maximum potential Disadvantages: The standard can be too high for the operation and frustrating to workers Data may be difficult to obtain The criteria on which the operation is based may not be comparable 4. An operational productivity is the ratio of the output to the number of units of an input resource. 25-1
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Chapter 25 Managing Productivity and Marketing Effectiveness A financial productivity measures the relationship between the output and the cost of one or more of the input resources. 5. A partial productivity is a productivity measure that focuses only on the relationship between the amount of one of the input resources and the output attained. A total productivity measures the relationship between the output and the total input costs of all the required input resources for the output. 6. Manufacturing personnel often prefer operational productivity measures over financial productivity measures because all the input data for computing operational productivity measures are either results of their activities or resources consumed for these activities. Financial productivity measures use costs of resources that often are results of activities by personnel outside of manufacturing functions. 7. Measurements of marketing effectiveness include market share, sales price, sales mix, and sales quantity variances. 8. Sales quantity variance is a component of sales volume variance. A sales volume variance can be the result of both sales mix and sales quantity variances. 9. A market size variance measures the effect on the contribution margin and operating income of a firm because of changes in the total market size for all firms in the same industry or product segment. A market share variance examines the effect on the contribution margin and operating income of a firm because of deviations of the firm’s actual market shares from its budgeted market shares.
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