Question 1

In setting a target profit, companies set the target rate of return

Accepted Answer

A)  using the same bases. 
B)  to cover only internal benchmarks. 
C)  to cover only external benchmarks. 
D)  to cover both internal and external benchmarks. 
A)  using the same bases. 
B)  to cover only internal benchmarks. 
C)  to cover only external benchmarks. 
D)  to cover both internal and external benchmarks. D

Question 2

Ghangi Manufacturing Company has the following unit manufacturing cost for products currently sold to outside customers:   A special order for 3,000 units has been received from a foreign company. The unit price requested is $65. The normal unit price is $90. If the order is accepted, unit variable costs will increase by $2 for additional shipping costs and since the company currently does not have sufficient excess operating capacity, an additional fixed cost of $10,000 would have to be incurred to lease additional production space without affecting present sales to outside customers. If the order is accepted, what will the differential operating income or loss be?

Accepted Answer

Differential Loss = $(1,000),

Question 3

Omar just purchased his first fully-electric automobile. He installed a level-2 charger in his home to charge the battery daily for the new auto. When he contacted his electricity provider, he was informed of a program where he could be charged a lower rate per KWH if he charges the auto overnight instead of during the daytime. What pricing tactic is being used in this situation?

Accepted Answer

Peak load pricing

Question 4

Nissan uses target costing. Assume that the company expects the market selling price for a compact sedan model is going to be $27,000 for the upcoming year and expects to sell 5,000 of this model. If Nissan has invested assets of $100,000,000 with a ROI required of 12%, what is the target cost for a Nissan compact sedan model for the upcoming year?

Accepted Answer

Target Cost Per Unit = $24,600, ROI per

Question 5

Millennial Manufacturing incurs $38 of variable costs and $22 of allocated fixed costs in the production of an ergonomic backpack that normally sells for $90. A buyer in Canada offers to purchase 5,000 units at $56 each. Millennial Manufacturing has excess capacity and can handle the additional production. What effect will acceptance of this offer have on the company's operating income?

Accepted Answer

Differenti

Question 6

Price takers

Accepted Answer

A)  must accept the prevailing market price and sell each unit at that given price. 
B)  are found in non-competitive markets. 
C)  have the power to influence the market price. 
D)  enjoy pricing power since they can set their own product prices. 
A)  must accept the prevailing market price and sell each unit at that given price. 
B)  are found in non-competitive markets. 
C)  have the power to influence the market price. 
D)  enjoy pricing power since they can set their own product prices.

Question 7

Which of the following is not a characteristic of price takers?

Accepted Answer

A)  Customers see little difference in the product/service being offered with other firms. 
B)  Customers see real or perceived differentiated quality/innovation in the product or service. 
C)  Product/service costs must be carefully controlled by the provider since the price cannot be adjusted easily. 
D)  Much competition exists in the market for comparable products/services with each firm working toward being a market leader. 
A)  Customers see little difference in the product/service being offered with other firms. 
B)  Customers see real or perceived differentiated quality/innovation in the product or service. 
C)  Product/service costs must be carefully controlled by the provider since the price cannot be adjusted easily. 
D)  Much competition exists in the market for comparable products/services with each firm working toward being a market leader.

Question 8

In a competitive market, where target costing is used, the price per unit is established by

Accepted Answer

A)  management. 
B)  the marketplace. 
C)  sales representatives. 
D)  managerial accountants. 
A)  management. 
B)  the marketplace. 
C)  sales representatives. 
D)  managerial accountants.

Question 9

Sansom Industries manufactures car radios to be installed in Ford automobiles. The unit variable cost is $25 and the unit fixed cost is $7. The desired return on investment (ROI) per unit is $8. What is the markup percentage that Sansom Industries uses to determine the price for each radio produced using a cost-plus pricing method?

Accepted Answer

A)  15% 
B)  20% 
C)  25% 
D)  32% 
A)  15% 
B)  20% 
C)  25% 
D)  32%

Question 10

In a special-order scenario, if a company would need to expand capacity in order to fulfill a special order, then selection of whether to accept the special order should be based on

Accepted Answer

A)  contribution margins of the two options since the fixed costs will not change. 
B)  operating incomes since fixed costs will change. 
C)  the amount of additional fixed costs to be incurred for the special order. 
D)  the variable costs of the special order incurred since only variable costs change. 
A)  contribution margins of the two options since the fixed costs will not change. 
B)  operating incomes since fixed costs will change. 
C)  the amount of additional fixed costs to be incurred for the special order. 
D)  the variable costs of the special order incurred since only variable costs change.

Question 11

What costs and revenues are relevant in special-order decisions?

Accepted Answer

The costs and revenues that are relevant

Question 12

Philly Pretzels produces specialty pretzels which it normally sells as a box of a dozen pretzels. The cost per box of 12 pretzels is normally $6, of which $4.50 is variable and $1.50 is fixed. A local charity has requested to purchase 500 boxes at $4 per box. Philly Pretzels has sufficient unused capacity to produce the 500 special-order units. If the special order is accepted, what will the effect be on the income of Philly Pretzels?

Accepted Answer

The answer of Philly Pretzels produces specialty pretzels which it...

Question 13

Match the term with the appropriate definition.
-Price makers

Accepted Answer

A)  comprised of many buyers and sellers and undifferentiated products 
B)  have the power to influence the market price and enjoy pricing power 
C)  intersection of units supplied and units demanded which shows the corresponding price 
D)  accept the prevailing market price and sell each unit at that given market price 
A)  comprised of many buyers and sellers and undifferentiated products 
B)  have the power to influence the market price and enjoy pricing power 
C)  intersection of units supplied and units demanded which shows the corresponding price 
D)  accept the prevailing market price and sell each unit at that given market price

Question 14

Match the term with the appropriate definition.
-Equilibrium point

Accepted Answer

A)  comprised of many buyers and sellers and undifferentiated products 
B)  have the power to influence the market price and enjoy pricing power 
C)  intersection of units supplied and units demanded which shows the corresponding price 
D)  accept the prevailing market price and sell each unit at that given market price 
A)  comprised of many buyers and sellers and undifferentiated products 
B)  have the power to influence the market price and enjoy pricing power 
C)  intersection of units supplied and units demanded which shows the corresponding price 
D)  accept the prevailing market price and sell each unit at that given market price

Question 15

Explain the difference between target costing and cost-plus pricing.

Accepted Answer

In cost-plus pricing, an entity begins w

Question 16

Mandela Corporation has collected the following data concerning one of its products:   
a. What is the ROI percentage for Mandela Corporation?
b. What is the markup percentage per unit for Mandela Corporation?
c. If the current market price per unit is $140, what is the target cost for Mandela Corporation?

Accepted Answer

a. ROI percentage per unit = (Investment

Question 17

Why is the concept of pricing so important to the profitability of a company?

Accepted Answer

A)  Pricing a product or service too high for the market may result in lost sales to competitors. 
B)  Pricing a product too low may result in lost sales due to the customer perception of lower quality. 
C)  Prices must adequately cover all costs for the company to show operating income. 
D)  All of these impact pricing and its impact on the profitability of a company. 
A)  Pricing a product or service too high for the market may result in lost sales to competitors. 
B)  Pricing a product too low may result in lost sales due to the customer perception of lower quality. 
C)  Prices must adequately cover all costs for the company to show operating income. 
D)  All of these impact pricing and its impact on the profitability of a company.

Question 18

In applying the cost-plus method of pricing, full cost refers to

Accepted Answer

A)  product cost. 
B)  both variable production and variable selling and administrative costs. 
C)  total production and selling and administrative costs. 
D)  total fixed production and selling and administrative costs. 
A)  product cost. 
B)  both variable production and variable selling and administrative costs. 
C)  total production and selling and administrative costs. 
D)  total fixed production and selling and administrative costs.

Question 19

Which of the following statements is correct regarding the relationship between a product's cost, price, and profit?

Accepted Answer

A)  Price a product too low, customers will always purchase a product because the price is lower than the competitor. 
B)  Price a product too high, customers will most likely continue to buy if they have purchased the product in the past. 
C)  Price a product too high or too low can result in lost sales to competitors. 
D)  There is no direct correlation between a product's cost, price and profit since a company can charge whatever it desires for a product. 
A)  Price a product too low, customers will always purchase a product because the price is lower than the competitor. 
B)  Price a product too high, customers will most likely continue to buy if they have purchased the product in the past. 
C)  Price a product too high or too low can result in lost sales to competitors. 
D)  There is no direct correlation between a product's cost, price and profit since a company can charge whatever it desires for a product.

Question 20

Peak-load pricing occurs when a higher price is charged as

Accepted Answer

A)  demand approaches the physical limit of the capacity to produce a product or provide a service. 
B)  supply approaches the physical limit of the capacity to produce a product or provide a service. 
C)  supply of a product or service exceeds the demand for the product or service. 
D)  demand is less than the supply of the product or service. 
A)  demand approaches the physical limit of the capacity to produce a product or provide a service. 
B)  supply approaches the physical limit of the capacity to produce a product or provide a service. 
C)  supply of a product or service exceeds the demand for the product or service. 
D)  demand is less than the supply of the product or service.

In setting a target profit, companies set the target rate of return

Price takers

Which of the following is not a characteristic of price takers?

In a competitive market, where target costing is used, the price per unit is established by

In a special-order scenario, if a company would need to expand capacity in order to fulfill a special order, then selection of whether to accept the special order should be based on

What costs and revenues are relevant in special-order decisions?

Match the term with the appropriate definition. -Price makers

Match the term with the appropriate definition. -Equilibrium point

Explain the difference between target costing and cost-plus pricing.

Why is the concept of pricing so important to the profitability of a company?

In applying the cost-plus method of pricing, full cost refers to

Which of the following statements is correct regarding the relationship between a product's cost, price, and profit?

Peak-load pricing occurs when a higher price is charged as

Cost Accounting Has Purpose

Refresher on Cost Terms Road Map

Cost Behavior and Estimation

Cost-Volume-Profit Analysis

Cost Accounting Has Purpose

Mastering the Master Budget

Capital Budgeting Choices and Decisions

Job Costing

Activity- Based Costing

Variance Analysis and Standard Costing

Process Costing

Absorption Versus Variable Costing

Data Analytics

Support Department Costing

Joint Costs and Decision-Making

Management Control Systems and Transfer Pricing

Business Strategy, Performance Measurement, and the Balanced Scorecard

Filters

Exam 16: The Art and Science of Pricing to Optimize Revenue

In setting a target profit, companies set the target rate of return

Price takers

Which of the following is not a characteristic of price takers?

In a competitive market, where target costing is used, the price per unit is established by

In a special-order scenario, if a company would need to expand capacity in order to fulfill a special order, then selection of whether to accept the special order should be based on

What costs and revenues are relevant in special-order decisions?

Match the term with the appropriate definition. -Price makers

Match the term with the appropriate definition. -Equilibrium point

Explain the difference between target costing and cost-plus pricing.

Why is the concept of pricing so important to the profitability of a company?

In applying the cost-plus method of pricing, full cost refers to

Which of the following statements is correct regarding the relationship between a product's cost, price, and profit?

Peak-load pricing occurs when a higher price is charged as

Cost Accounting Has Purpose

Refresher on Cost Terms Road Map

Cost Behavior and Estimation

Cost-Volume-Profit Analysis

Cost Accounting Has Purpose

Mastering the Master Budget

Capital Budgeting Choices and Decisions

Job Costing

Activity- Based Costing

Variance Analysis and Standard Costing

Process Costing

Absorption Versus Variable Costing

Data Analytics

Support Department Costing

Joint Costs and Decision-Making

Management Control Systems and Transfer Pricing

Business Strategy, Performance Measurement, and the Balanced Scorecard

Filters