Exam 15: Target Costing and Cost Analysis for Pricing Decisions

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

The difference between absorption manufacturing cost and total cost with respect to product pricing is caused by:

The following data pertain to Waters Corporation's residential humidifier: A.Calculate the fixed selling and administrative cost allocated to each humidifier. A.Price = total unit cost + (markup percentage * total unit cost) $450 = X + (0.12 * X) $450 = 1.12X $401.79 = X Because the total unit cost is $401.79,the allocated fixed selling and administrative cost would be $21.79 ($401.79 - $240.00 - $80.00 - $60.00). B. B.For each of the following bases,determine the appropriate percentage markup on cost that will result in a target price of $450 per humidifier: (1)variable manufacturing cost,(2)absorption manufacturing cost,and (3)total variable cost.(Round percentages to the nearest one-hundredth of a percent. )

The following data pertain to Lemon Enterprises: What price will the company charge if the firm uses cost-plus pricing based on variable manufacturing cost and a markup percentage of 110%?

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

Which of the following formulas represents the markup percentage on total cost?

The four tasks that follow take place with the concept known as target costing: 1-Value engineering. 2-Establish a target selling price. 3-Establish a target cost. 4-Establish a target profit. Which of the following choices depicts the correct sequence of these tasks?

Which of the following management tools is a key component of target costing?

Which of the following terms describes a pricing strategy in which a new product's initial price is set high and then eventually lowered to appeal to a broader range of customers?

From an economic perspective,a company's profit-maximizing quantity is found where:

The controller for Shutterbug Photographic Supply has established the following cost pools and cost drivers: A.Determine the order's target price by using the activity-cost pools. B.Assume that Halifax used a single,combined overhead rate based on weight of raw materials. 1.Determine the predetermined overhead rate. 2.Determine the expected cost of the order. 3.Determine the target price. C.The activity-based approach ("A")makes more specific use of the order's characteristics (and cost drivers).While this order would represent 32% of the expected direct materials usage,the order would require only 8% of the setups,0% of the hazardous waste,0.4% of the inspections,and 2% of the machine hours.No overhead application method based on any single variable can reflect all this diversity in resource consumption. C.Which approach above ("A" or "B")seems to be a more reasonable method to establish target prices? Explain.

Which of the following statements regarding price elasticity is false?

Consider the following statements about absorption-cost pricing formulas: I.Absorption-cost formulas consider a company's fixed manufacturing costs when establishing a selling price. II.Absorption-cost formulas are often justified on the grounds that a company must cover all of its costs in the long run. III.Absorption-cost data are the type that managers need when facing certain pricing decisions,such as whether or not to accept a special order. Which of the above statements is (are)true?

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

The following data pertain to Quincey Enterprises: What price will the company charge if the firm uses cost-plus pricing based on total cost and a markup percentage of 60%?

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?

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

Company A uses a pricing approach where the initial price for a product is set high and then lowered,and Company B uses an approach where initial prices are set low in an effort to gain market share.What terms best describe these practices?

Consider the following statements about pricing: I.Prices are often determined by the market,subject to the constraint that costs must be covered in the long run. II.Prices are often based on costs,subject to the constraint that customers and competitors will exert an influence. III.A balance of market forces and cost is important when making pricing decisions. Which of the above statements is (are)true?

A number of antitrust laws have been enacted that affect product pricing. Required: A.Define price discrimination and predatory pricing. A.Price discrimination involves charging different prices to different customers for the same goods and services when the price differences are not based on variations in production,selling,and/or distribution cost.Predatory pricing,on the other hand,is the practice of reducing a price for a short time in order to enhance demand and then raising the price sharply,often with restricted supply. B.Assume that a company has been charged with price discrimination.What role can cost information play in defending the firm's pricing practices? B.Such information can be used to show differences in costs of providing a product or service to customers.For example,a customer that places a few large orders having low quality requirements can be served less expensively than another customer that places many small orders with tight delivery times and exacting quality specifications.