Exam 12: Differential Analysis and Product Pricing

The amount of increase or decrease in cost that is expected from a particular course of action as compared to an alternative is termed:

Differential revenue is the amount of increase or decrease in revenue expected from a particular course of action as compared to an alternative.

Soap Company manufactures Soap X and Soap Y and can sell all it can make of either.Hours available to produce the products is the constrained resources.Based on the following data,if Soap could reduce the processing time for X by 10%,which of the following statements is true?

A practical approach that is frequently used by managers when setting normal selling price is the cost-plus approach.

Wyandott Co.produces two products.Both products pass through a firing process that is operating at full capacity and is a production bottleneck.Product A requires 2 hours of processing and has a contribution margin per unit of $60.Product B requires 1 hour of processing and has a contribution margin of $40.Which of the following provides the most accurate assessment of the situation assuming unlimited demand for each product?

The product with the highest contribution margin per scarce resource is the most profitable.

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

When eliminating a product or segment of a business,the fixed costs pertaining to the product or segment will always be eliminated.

Whiteville Co.can further process Product B to produce Product C.Product B is currently selling for $45 per pound and costs $30 per pound to produce.Product C would sell for $80 per pound and would require an additional cost of $18 per pound to produce.What is the differential cost of producing Product C?

Hill Co.can further process Product O to produce Product P.Product O is currently selling for $65 per pound and costs $42 per pound to produce.Product P would sell for $82 per pound and would require an additional cost of $13 per pound to produce.The differential revenue of producing Product P is $82 per pound.

When deciding to make or buy a part needed for the manufacturing process,management needs to consider whether the plant has excess production capacity available to make the part or if current production will need to be interrupted to manufacture the part.

In using the variable cost concept of applying the cost-plus approach to product pricing,what is included in the markup?

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

Refer to the information provided for Apope Corporation.The dollar amount of desired profit from the production and sale of the company's product is:

Target costing is arrived at by:

In using the total cost concept of applying the cost-plus approach to product pricing,what is included in the cost amount to which the markup is added?

The product cost concept includes all manufacturing costs in the cost amount to which the markup is added to determine product price.

A cost that will not be affected by later decisions is termed:

Opportunity cost is the amount of increase or decrease in revenue that would result from the best available alternative to the proposed use of cash or its equivalent.

Hill Co.can further process Product O to produce Product P.Product O is currently selling for $65 per pound and costs $42 per pound to produce.Product P would sell for $82 per pound and would require an additional cost of $13 per pound to produce.The differential revenue of producing Product P is $17 per pound.