Question 1

A firm typically uses only one of the three cost-plus pricing formulas.

Accepted Answer

A) True 
 B)False

Question 2

The following data pertain to Arctic Company's commercial snow thrower:
   
Required:

For each of the following cost bases, determine the appropriate percentage markup that will result in a price of $980 for the snow thrower. (Round percentages to nearest one-hundredth of a percent.)

A. Variable manufacturing cost.
B. Absorption manufacturing cost.
C. Total cost.
D. Total variable cost.

Accepted Answer

The answer of The following data pertain to Arctic Company's...

Question 3

Consider the following statements regarding the economic pricing model:
I. The economic model is limited in use because a firm's demand curve is difficult to determine.
II. The marginal revenue and marginal cost model is valid for all forms of market organization (perfect competition, oligopoly, and so forth).
III. Cost accounting systems are not designed to measure the marginal changes in cost incurred as production and sales increase.
Which of the above statements is (are) true?

Accepted Answer

A)  I only. 
B)  III only. 
C)  I and III. 
D)  II and III. 
E)  I, II, and III. 
A)  I only. 
B)  III only. 
C)  I and III. 
D)  II and III. 
E)  I, II, and III.

Question 4

Which of the following represents the cost-plus pricing formula?

Accepted Answer

A)  Price = cost + (markup percentage * cost). 
B)  Price = cost + markup percentage. 
C)  Price = markup percentage * cost. 
D)  Price = cost / markup percentage. 
E)  Price = cost + (markup percentage + cost). 
A)  Price = cost + (markup percentage * cost). 
B)  Price = cost + markup percentage. 
C)  Price = markup percentage * cost. 
D)  Price = cost / markup percentage. 
E)  Price = cost + (markup percentage + cost).

Question 5

Use the following information to answer the following Questions
Ralph’s Auto Repair uses time and material pricing. The body shop, which anticipates 10,000 direct labor hours of activity, has the following data:

-Assuming there is no profit markup on material cost, the amount to be added to each dollar of material cost to obtain the total material charge is:

Accepted Answer

A)  $0.06. 
B)  $0.08. 
C)  $0.10. 
D)  $0.13. 
E)  None of the answers is correct. 
A)  $0.06. 
B)  $0.08. 
C)  $0.10. 
D)  $0.13. 
E)  None of the answers is correct.

Question 6

The revenue curve shows the relationship between the sales price and quantity sold.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following features is typically absent in target costing?

Accepted Answer

A)  An approach that begins with the determination of a product or service's target cost. 
B)  An approach that begins with the determination of a product or service's target selling price. 
C)  A focus on the customer. 
D)  A focus on product design. 
E)  A focus on process design. 
A)  An approach that begins with the determination of a product or service's target cost. 
B)  An approach that begins with the determination of a product or service's target selling price. 
C)  A focus on the customer. 
D)  A focus on product design. 
E)  A focus on process design.

Question 8

Consider the following statements about activity-based costing and its use in pricing:
I. A company that uses target costing generally would have little need for activity-based costing.
II. Companies that use cost-plus pricing methods would have little need for activity-based costing.
III. The use of activity-based costing will often lead to better pricing decisions by managers.
Which of the above statements is (are) true?

Accepted Answer

A)  I only. 
B)  II only. 
C)  III only. 
D)  I and III. 
E)  I, II, and III. 
A)  I only. 
B)  II only. 
C)  III only. 
D)  I and III. 
E)  I, II, and III.

Question 9

If the volume sold reacts strongly to changes in price, demand:

Accepted Answer

A)  has no elasticity. 
B)  has negative elasticity. 
C)  is inelastic. 
D)  is elastic. 
E)  is unrealistic. 
A)  has no elasticity. 
B)  has negative elasticity. 
C)  is inelastic. 
D)  is elastic. 
E)  is unrealistic.

Question 10

Inse Corporation uses time and material pricing. The repair department expects 20,000 direct labor hours of activity and has the following selected data:
 
The company's time charge per hour is:

Accepted Answer

A)  $11. 
B)  $24. 
C)  $40. 
D)  $64. 
E)  $75. 
A)  $11. 
B)  $24. 
C)  $40. 
D)  $64. 
E)  $75.

Question 11

Use the following information to answer the following Questions
The Pines Company, which manufactures office equipment, is ready to introduce a new line of portable copiers. The following copier data are available:

-What price will the company charge if the firm uses cost-plus pricing based on total manufacturing cost and a markup percentage of 160%?

Accepted Answer

A)  $150. 
B)  $384. 
C)  $390. 
D)  $624. 
E)  None of the answers is correct. 
A)  $150. 
B)  $384. 
C)  $390. 
D)  $624. 
E)  None of the answers is correct.

Question 12

When activity-based costing is integrated with target costing, a product's projected costs always go up.

Accepted Answer

A) True 
 B)False

Question 13

In a cost-plus approach to pricing:

Accepted Answer

A)  there is an inverse relationship between the magnitude of the cost basis and the markup percentage. 
B)  there is a direct relationship between the magnitude of the cost basis and the markup percentage. 
C)  the cost basis used must include fixed manufacturing overhead. 
D)  "plus" refers to the addition of allocated administrative overhead to the direct manufacturing costs. 
E)  "plus" refers to the addition of allocated fixed manufacturing overhead to the variable manufacturing costs. 
A)  there is an inverse relationship between the magnitude of the cost basis and the markup percentage. 
B)  there is a direct relationship between the magnitude of the cost basis and the markup percentage. 
C)  the cost basis used must include fixed manufacturing overhead. 
D)  "plus" refers to the addition of allocated administrative overhead to the direct manufacturing costs. 
E)  "plus" refers to the addition of allocated fixed manufacturing overhead to the variable manufacturing costs.

Question 14

What is price skimming?

Accepted Answer

A)  The initial price is set low and kept constant. 
B)  The initial price is set low and then raised. 
C)  The initial price is set high and later lowered. 
D)  The initial price is set high and kept constant. 
E)  The initial price is set high and then raised. 
A)  The initial price is set low and kept constant. 
B)  The initial price is set low and then raised. 
C)  The initial price is set high and later lowered. 
D)  The initial price is set high and kept constant. 
E)  The initial price is set high and then raised.

Question 15

Flagler Electronics currently sells a camera for $240. An aggressive competitor has announced plans for a similar product that will be sold for $205. Flagler's marketing department believes that if the price is dropped to meet competition, unit sales will increase by 10%. The current cost to manufacture and distribute the camera is $175, and Flagler has a profit goal of 20% of sales. If Flagler meets competitive selling prices, what is the company's target cost?

Accepted Answer

A)  $41. 
B)  $48. 
C)  $164. 
D)  $175. 
E)  $192. 
A)  $41. 
B)  $48. 
C)  $164. 
D)  $175. 
E)  $192.

Question 16

Trailrider Corporation manufactures part no. 67, which is used in the production of mountain bikes. Per-unit information about part no. 67 follows.
   
Trailrider has traditionally used a 20% markup on total cost to arrive at a reasonable selling price. The company, though, has noticed a sizable drop in sales volume during the last few quarters, which it attributes to new entrants in the marketplace. 
Required:
A. Compute the current selling price of part no. 67.
B. If management desired to meet the prevailing market price and maintain the current rate of profit on sales, what must happen to the company's total manufacturing costs? By how much?

Accepted Answer

A. The current selling price is $36: ($1

Question 17

Austin Company, which experiences considerable seasonal variation in its activity and has a high level of fixed costs, is preparing a bid for a project. This particular project will be done during a slack period of the year.
Required:

A. How should the fixed costs be handled in the bidding approach to this project?
B. Assume that the company wins the bid and performs the job on a profitable basis, consistent with the results as projected in the bid. Several months later, the customer contacts Austin and requests a bid to do another job. This project, however, must be done during a peak season. How should Austin's management respond? How do you think the customer will respond?

Accepted Answer

A. Fixed costs should not receive the sa

Question 18

The curve that shows the change in total revenue that accompanies a change in quantity sold is called the:

Accepted Answer

A)  marginal revenue curve. 
B)  average cost curve. 
C)  profit curve. 
D)  demand curve. 
E)  revenue curve. 
A)  marginal revenue curve. 
B)  average cost curve. 
C)  profit curve. 
D)  demand curve. 
E)  revenue curve.

Question 19

Use the following information to answer the following Questions
Longwood, Inc. manufactures various lines of computer equipment and is planning to introduce a new line of laptops. Current plans call for the production and sale of 1,000 units, with estimated costs as follows:
 
The average amount of capital invested in the laptop product line is $900,000 and Longwood’s target return on investment is 18%.

-What price must Longwood charge if the company uses cost-plus pricing based on total variable cost?

Accepted Answer

A)  $712. 
B)  $900. 
C)  $1,030. 
D)  $1,192. 
E)  None of the answers is correct. 
A)  $712. 
B)  $900. 
C)  $1,030. 
D)  $1,192. 
E)  None of the answers is correct.

Question 20

Charlene Company, which desires to enter the market with a new product, will perform the following tasks:
1-Design and engineer the product.
2-Determine the product's cost.
3-Determine the desired profit margin.
4-Determine the suggested selling price.
If Charlene uses target costing, which task would the company perform first?

Accepted Answer

A)  1. 
B)  2. 
C)  3. 
D)  4. 
E)  None of the answers is correct. 
A)  1. 
B)  2. 
C)  3. 
D)  4. 
E)  None of the answers is correct.

A firm typically uses only one of the three cost-plus pricing formulas.

Which of the following represents the cost-plus pricing formula?

The revenue curve shows the relationship between the sales price and quantity sold.

Which of the following features is typically absent in target costing?

If the volume sold reacts strongly to changes in price, demand:

Inse Corporation uses time and material pricing. The repair department expects 20,000 direct labor hours of activity and has the following selected data: The company's time charge per hour is:

When activity-based costing is integrated with target costing, a product's projected costs always go up.

In a cost-plus approach to pricing:

What is price skimming?

The curve that shows the change in total revenue that accompanies a change in quantity sold is called the:

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters

Exam 15: Target Costing and Cost Analysis for Pricing Decisions

A firm typically uses only one of the three cost-plus pricing formulas.

Which of the following represents the cost-plus pricing formula?

The revenue curve shows the relationship between the sales price and quantity sold.

Which of the following features is typically absent in target costing?

If the volume sold reacts strongly to changes in price, demand:

Inse Corporation uses time and material pricing. The repair department expects 20,000 direct labor hours of activity and has the following selected data: The company's time charge per hour is:

When activity-based costing is integrated with target costing, a product's projected costs always go up.

In a cost-plus approach to pricing:

What is price skimming?

The curve that shows the change in total revenue that accompanies a change in quantity sold is called the:

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters