Exam 12: Differential Analysis and Product Pricing

When standard costs are used in applying the cost-plus approach to product pricing,the standards should be based upon normal levels of performance.

Jarvis Company uses the total cost concept of applying the cost-plus approach to product pricing.The costs and expenses of producing and selling 35,000 units of Product E are as follows:

Based on the information provided for Venus Co.,what is the differential cost of producing Product Y?

In attempting to improve profitability when faced with a bottleneck related to hours that is involved in the production of two or more products,which of the following is most important for management to consider?

In using the product cost concept of applying the cost-plus approach to product pricing,selling expenses,administrative expenses,and profit are covered in the markup.

When evaluating whether to lease or sell an equipment,book value is considered to be the cost of selling the equipment.

Dinkins Inc.is considering disposing of a machine with a book value of $50,000 and an estimated remaining life of five years.The old machine can be sold for $15,000.A new machine with a purchase price of $150,000 is being considered as a replacement.It will have a useful life of five years and no residual value.It is estimated that variable manufacturing costs will be reduced from $70,000 to $45,000 if the new machine is purchased.The net differential increase or decrease in cost for the entire five years for the new equipment is:

Defense contractors would be more likely to use which of the following cost concepts in pricing their product?

A business is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $15 per unit.The unit cost for the business to make the part is $20,including fixed costs,and $12,not including fixed costs.If 30,000 units of the part are normally purchased during the year but could be manufactured using unused capacity,what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?

The condensed income statement for a business for the past year is presented as follows:

Refer to the information provided for Bythel Corporation.The unit selling price for the company's product is:

In using the variable cost concept of applying the cost-plus approach to product pricing,variable manufacturing costs and variable selling and administrative expenses must be covered by the markup.

In contrast to the total product and variable cost concepts used in setting selling prices,the target cost approach assumes that:

When evaluating whether to lease or sell equipment,the book value of the equipment is considered to be a sunk cost and not a differential cost.

Glover Inc.manufactures Product B,incurring variable costs of $15.00 per unit and fixed costs of $70,000.Glover desires a profit equal to a 12% rate of return on assets.Assets of $785,000 are devoted to producing Product B,and 100,000 units are expected to be produced and sold.

Differential revenue is the amount of income that would result from the best available alternative for the proposed use of cash.

The product cost concept includes the selling and administrative expenses in the cost amount to which the markup is added to determine product price.

A business received an offer from an exporter for 10,000 units of product at $13.50 per unit.The acceptance of the offer will not affect normal production or domestic sales prices.The following data are available:

What pricing method is most likely to be used if there are several providers in the same market and there is sufficient demand for the product?

Eliminating a product or segment will usually eliminates all of the product's or segment's variable costs.