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Exam 12: Technology and Operations Management

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Question 71

True/False

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Variable costs are those costs that increase as the level of production increases.

A) True
B) False

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Question 72

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Gourmet Pets feels its target market is more concerned with perceived quality than actual product cost.They also feel that the newness of this concept offers an opportunity to make high profits since they are the first firm to enter this market,so they face no direct competition.Their decision to charge a high price is consistent with the skimming price strategy.

A) True
B) False

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Question 73

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An organization's cost base is made up of the _______ costs associated with delivering the organization's products or services to the marketplace.

Ongoing operating levels below BEP will eventually result in the organization becoming ruined.

is fundamental to determining the feasibility of various sales objective levels.

Phil asks you to calculate the break-even point for his firm.You respond that you will need sales revenue and total liabilities.

Making operations decisions is a reason for managers to understand the configuration of the cost base of the organization.

Understanding an organization's cost base is essential in determining the required communications strategy which will be utilized in the marketing of a product and its corresponding impact on profit.

An organization's cost base is made up of the bad costs associated with delivering the organization's products or services to the marketplace.

The market pressures which will impact the cost base going forward is an area of focus for managers to develop a good understanding of an organization's cost base.

To build an understanding of the cost base is accomplished by working through the various zones within an organization's departments and determining the cost composition of each.

The point where the revenue, from the sales of the products (units) offered to the marketplace, equals the total costs (variable costs + fixed costs) associated with producing these products (units) is balanced quantity.

is called the break-even point.

Virtual Electronics utilizes a strategy to charge a very high introductory price for their automobile video theater.After identifying that their rival firms did not carry this new product,they chose this strategy to achieve maximum profits.Virtual Electronics has chosen a penetration strategy.

A skimming pricing strategy establishes a low price in order to ensure little competition.

The formula for the Break-even Point is:

Producers often use market share as a primary basis for setting prices on the goods and services they offer the public.

All of the following are areas of focus for managers to develop a good understanding of an organization's cost base,EXCEPT:

Break-even analysis is the process used to determine the profitability of a product at various levels of sales.

Indirect costs are those costs which are directly tied to the manufacturing of a product,or the delivery of a service,depending on the type of business being assessed.