Sharapova Industries budgeted the following costs for the production of its one and only product, tennis balls, for the next fiscal year: \[\begin{array} { l r } \text { Materials } & \$ 35,000 \\ \text { Labor } & 25,000 \\ \text { Overhead: } & \\ \text { Variable } & 30,000 \\ \text { Fixed } & 15,000 \\ \text { Selling and administrative: } & \\ \text { Variable } & 7,500 \\ \text { Fixed } & \underline { 12,500 } \\ \text { Total costs } & \$ 125,000 \end{array}\] Sharapova Industries has a target profit of $50,000.The average target markup for setting prices as a percentage of variable production costs would be _____.

A) 158% B) 94% C) 69% D) 24% A) 158% B) 94% C) 69% D) 24%

Williams Industries budgeted the following costs for the production of its only product, tennis balls, for the next fiscal year: \[\begin{array} { l r } \text { Materials } & \$ 35,000 \\ \text { Labor } & 25,000 \\ \text { Overhead: } & \\ \text { Variable } & 30,000 \\ \text { Fixed } & 15,000 \\ \text { Selling and administrative: } & \\ \text { Variable } & 7,500 \\ \text { Fixed } & \underline { 12,500 } \\ \text { Total costs } & \$ 125,000 \end{array}\] Williams Industries has a target profit of $50,000.The average target markup for setting prices as a percentage of total costs would be _____.

A) 68% B) 47% C) 19% D) 40% A) 68% B) 47% C) 19% D) 40%

Michigan Industries budgeted the following costs for the production of its only product, golf balls, for the next fiscal year: \[\begin{array} { l r } \text { Materials } & \$ 35,000 \\ \text { Labor } & 25,000 \\ \text { Overhead: } & \\ \text { Variable } & 30,000 \\ \text { Fixed } & 15,000 \\ \text { Selling and administrative: } & \\ \text { Variable } & 7,500 \\ \text { Fixed } & \underline { 12,500 } \\ \text { Total costs } & \$ 125,000 \end{array}\] Michigan Industries has a target profit of $50,000._____ is the target price.

A) $125,000 B) $30,000 C) $175,000 D) $111,000 A) $125,000 B) $30,000 C) $175,000 D) $111,000

Exam 5: Relevant Information and Decision Making With a Focus on Pricing Decisions

The marginal cost often increases as production increases up to a point because of efficiencies created by larger amounts.

Free

(True/False)

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Question 1

Correct Answer:

Verified

False

Total fixed manufacturing costs / selected volume level

Free

(Short Answer)

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Question 2

Correct Answer:

Verified

Fixed cost per unit of product

The additional cost resulting from producing and selling one additional unit

Free

(Short Answer)

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Question 3

Correct Answer:

Verified

Marginal cost

Full cost or fully allocated cost means the total of all manufacturing costs.

(True/False)

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Question 4

The degree to which information is relevant or precise often depends on the degree to which it is qualitative or quantitative.

(True/False)

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Question 5

Sharapova Industries budgeted the following costs for the production of its one and only product, tennis balls, for the next fiscal year: Materials \ 35,000 Labor 25,000 Overhead: Variable 30,000 Fixed 15,000 Selling and administrative: Variable 7,500 Fixed Total costs \ 125,000 Sharapova Industries has a target profit of $50,000.The average target markup for setting prices as a percentage of variable production costs would be _____.

(Multiple Choice)

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(40)

Question 6

Decision makers should be aware of unit costs, and when in doubt, they should convert all unit costs into total costs under each alternative to get "the big picture".

(True/False)

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Question 7

Information is relevant if it is an) _____.

(Multiple Choice)

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Question 8

Prices based on variable costs represent a contribution approach to pricing.

(True/False)

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Question 9

_____ is are) defined as any method for making a choice.

(Multiple Choice)

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Question 10

Target pricing with full costing presumes a given volume level.

(True/False)

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Question 11

Williams Industries budgeted the following costs for the production of its only product, tennis balls, for the next fiscal year: Materials \ 35,000 Labor 25,000 Overhead: Variable 30,000 Fixed 15,000 Selling and administrative: Variable 7,500 Fixed Total costs \ 125,000 Williams Industries has a target profit of $50,000.The average target markup for setting prices as a percentage of total costs would be _____.

(Multiple Choice)

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Question 12

The marketing department at Surge Electronics has determined that there is a demand for a new small appliance, which would likely sell for $36.Surge Electronics currently produces a similar product for $38, using a full-cost approach.Surge Electronics would like to earn a 10% profit on the new appliance.The target cost of the new appliance is _____.

(Multiple Choice)

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Question 13

_____ is true about prediction methods.

(Multiple Choice)

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Question 14

Decisions might affect the past.

(True/False)

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Question 15

Market focus group studies and surveys may be used by a firm to determine the price of a product or service.

(True/False)

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Question 16

Michigan Industries budgeted the following costs for the production of its only product, golf balls, for the next fiscal year: Materials \ 35,000 Labor 25,000 Overhead: Variable 30,000 Fixed 15,000 Selling and administrative: Variable 7,500 Fixed Total costs \ 125,000 Michigan Industries has a target profit of $50,000._____ is the target price.

(Multiple Choice)

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Question 17

Markup is the amount by which cost exceeds price.

(True/False)

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Question 18

The difference between the gross margin and the market price is the target cost for a new product.

(True/False)

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Question 19

All of the following represent a popular markup formula for pricing except _____.

(Multiple Choice)

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Question 20

The marginal cost often increases as production increases up to a point because of efficiencies created by larger amounts.

Total fixed manufacturing costs / selected volume level

The additional cost resulting from producing and selling one additional unit

Full cost or fully allocated cost means the total of all manufacturing costs.

The degree to which information is relevant or precise often depends on the degree to which it is qualitative or quantitative.

Decision makers should be aware of unit costs, and when in doubt, they should convert all unit costs into total costs under each alternative to get "the big picture".

Information is relevant if it is an) _____.

Prices based on variable costs represent a contribution approach to pricing.

_____ is are) defined as any method for making a choice.

Target pricing with full costing presumes a given volume level.

_____ is true about prediction methods.

Decisions might affect the past.

Market focus group studies and surveys may be used by a firm to determine the price of a product or service.

Markup is the amount by which cost exceeds price.

The difference between the gross margin and the market price is the target cost for a new product.

All of the following represent a popular markup formula for pricing except _____.

Managerial Accounting, the Business Organization, and Professional Ethics

Introduction to Cost Behavior and Cost-Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and an Introduction to Activity-Based Costing

Relevant Information and Decision Making: Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Costing and Process-Costing Systems

Basic Accounting: Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

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