Following a Strategy of Product Differentiation, Rumsen Tools Corp Rumsen Produces No Defective Units but It Wants to Reduce

question 38

Multiple Choice

Following a strategy of product differentiation, Rumsen Tools Corp. makes a hand sander sold in hardware stores. Rumsen presents the following data for the years 2011 and 2012: $\begin{array} { | l | r | r | } \hline & \mathbf { 2 0 1 1 } & \mathbf { 2 0 1 2 } \\\hline \text { Units started } & \$ 11,000 & \$ 11,500 \\\hline \text { Selling price } & \$ 200 & \$ 210 \\\hline \text { Direct materials cost per square foot } & \$ 40,000 & \$ 40,750 \\\hline \text { Direct materials square feet } & 7 & 10 \\\hline \text { Manufacturing capacity (units) } & 13,500 & 13,500 \\\hline \text { Total conversion costs } & \$ 3,500,000 & \$ 377,500 \\\hline \text { Conversion costs per unit of capacity } & \$ 30 & \$ 32 \\\hline \text { Selling and customer service capacity (mumber of customers) } & 20 & 19 \\\hline \text { Total selling and customer service costs } & \$ 80,000 & \$ 80,625 \\\hline \text { Cost per customer of selling and customer service capacity } & \$ 4,000 & \$ 4,125 \\\hline\end{array}$ Rumsen produces no defective units but it wants to reduce the direct materials usage per hand sanderin 2012. Manufacturing conversion costs in each year depend upon production capacity defined in terms of the number of units that can be produced. Selling and customer-service costs depend upon the number of customers that the customer and service functions are designed to support. Rumsen had 33 customers in 2011 and 35 customers in 2011. The industry market size for hand sanders had increased by 7% from 2011 to 2012. Which of the following is a measure of the financial perspective?

• A)order delivery time.
• B)re-engineering process.
• C)operating income growth from charging higher profit margins for hand sanders.
• D)improving manufacturing processes.
• E)market share in the hand sander market.

---

Definitions:

Coupon Yield

The annual interest rate paid on a bond's face value, indicating the amount of interest received by bondholders annually.

Common Stock

Equity ownership in a corporation, where shareholders have voting rights and potentially receive dividends.

Capital Gains Rate

The capital gains rate is the tax rate applied to profits from the sale of assets or investments, which can vary based on the asset's holding period and the taxpayer's income level.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its share price, used by investors to evaluate the return on a dividend-paying stock.