Exam 12: Differential Analysis and Product Pricing

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

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

Tidewater Company uses the product cost concept of applying the cost-plus approach to product pricing.The cost and expenses of producing and selling 50,000 units of Product K are as follows:

Refer to the information provided for Apope Corporation.The markup percentage for the company's product is:

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

Max,Inc.can sell a large piece of machinery for $90,000.The machinery originally cost $240,000 and has accumulated depreciation of $130,000.Max will have to pay a 5% sales commission on the sale.Rather than sell,Max is considering leasing the machine.It can be leased for 4 years for $24,000 per year.Max has estimated future operating expenses to be $3,000 per year,and Max will be responsible for those expenses.Which of the following options most accurately describes the analysis and decision for Max?

In which of the following pricing methods is the markup added to manufacturing cots and selling and expenses to determine the selling price?

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

FDE Manufacturing Company has a normal plant capacity of 75,000 units per month.Because of an extra large quantity of inventory on hand,it expects to produce only 60,000 units in May.Monthly fixed costs and expenses are $150,000 ($2 per unit at normal plant capacity),and variable costs and expenses are $13 per unit.The present selling price is $25 per unit.The company has an opportunity to sell 5,000 additional units at $14.30 per unit to an exporter who plans to market the product under its own brand name in a foreign market.The additional business is therefore not expected to affect the regular selling price or quantity of sales of FDE Manufacturing Company.

A business is considering a cash outlay of $500,000 for the purchase of land,which it could lease for $40,000 per year.If alternative investments are available that yield a 21% return,the opportunity cost of the purchase of the land is:

If the total unit cost of manufacturing Product Y is currently $40 and the total unit cost after modifying the style is estimated to be $48,the differential cost for this situation is $8.

In deciding whether to accept business at a special price when the company is operating at full capacity,the special price should be set high enough to cover all fixed and variable costs and expenses.

Relevant revenues and costs focus on:

The amount of income that would result from an alternative use of cash is called:

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

Refer to the information provided for Bythel Corporation.The markup percentage for the company's product is:

Differential analysis can aid management in making decisions on a variety of alternatives,including whether to discontinue an unprofitable segment and whether to replace fixed assets.

Product J is one of the many products manufactured and sold by Gooble Company.An income statement by product line for the past year indicated a net loss for Product J of $7,250.This net loss resulted from sales of $265,000,cost of goods sold of $186,500,and operating expenses of $85,750.It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 40% of the operating expense is fixed.If Product J is retained,the revenue,costs,and expenses are not expected to change significantly from those of the current year.However,because of the net loss,management is considering the elimination of the unprofitable endeavor.Because of the large number of products manufactured,the total fixed costs and expenses are not expected to decline significantly if Product J is discontinued.

Hill Co.can further process Product O to produce Product P.Product O is currently selling for $60 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 cost of producing Product P is $13 per pound.

A business is considering a cash outlay of $880,000 for the purchase of land,which it intends to lease for $200,000 per year.If alternative investments are available that yield a 15% return,the opportunity cost of the purchase of the land is: