Question 6

Which of the following is true of value engineering?

1) It is the process of building a new product by first determining the selling price of the product.

2) It is the process by which a company analyzes its own process to reduce cost.

3) It is the process by which a systematic evaluation of all aspects of the value chain, with the objective of reducing costs and achieving a predetermined quality level.

4) It is the process by which the competitor's products are disassembled and analyzed

Question 5

Zolas' Heaters is approached by Ms. Leila, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Zolas' Heaters has excess capacity. The following per unit data apply for sales to regular customers:

Direct materials	$420
Direct manufacturing labor	100
Variable manufacturing support	70
Fixed manufacturing support	200
Total manufacturing costs	790
Markup (30% of total manufacturing costs)	237
Estimated selling price	$1027

If Ms. Leila wanted a long-term commitment, and not a one-time-special order, for supplying this product, calculate the most likely price to be quoted assuming the markup remains the same?

1) $790

2) $590

3) $520

4) $1027