Exam 5: Relevant Information for Decision Making With a Focus

According to courts in the United States,pricing is predatory only if companies set prices below their average total cost and actually lose money in order to drive their competitors out of business.

Missouri Company has a current production capacity level of 200,000 units per month.At this level of production,variable costs are $0.50 per unit and fixed costs are $0.50 per unit.Current monthly sales are 173,000 units.Gates Company has contracted Missouri Company about purchasing 20,000 units at $1.00 each.Current sales would not be affected by the special order and no additional fixed costs would be incurred on the special order.If the order is accepted,what is Missouri Company's change in profits?

In the short run,the minimum selling price should be equal to ________.

The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced at a low enough cost to provide an adequate profit margin is referred to as ________.

When absorption costing is used for the income statement,the difference between sales and ________ is gross margin.

Wyoming Company has the following data about its only product: Wyoming Company uses the absorption approach.What is the operating income?

In managerial accounting,variable cost is a reasonable approximation of marginal cost in many situations.

Orange Company has budgeted sales of $49,500 with the following budgeted costs: Required: Compute the average target markup percentage for setting prices as a percentage of: A)Total manufacturing costs B)Total variable costs C)Total costs D)Variable manufacturing costs

Full-cost pricing is more widely used in practice than the contribution margin approach to pricing.

Texas Company produces and sells 22,000 units of a single product.Costs associated with this level of production are as follows: The product normally sells for $160 per unit.Texas Company has received a special order to sell 2,000 units at $120 per unit.Texas Company has excess production capacity. Required: Compute the amount by which the operating income of Texas Company would change if the special order was accepted.

The absorption approach to the income statement emphasizes the distinction between fixed and variable costs.

In imperfect competition,a firm must increase the sales price to generate additional sales.

The total of all manufacturing costs plus the total of all selling and administrative costs is equal to ________.

Williams Company has budgeted the following costs for the production of its only product: Williams Company has a target profit of $50,000.What is the average target markup percentage for setting prices as a percentage of total costs?

Serena Company has budgeted the following costs for the production of its only product: Serena Company has a target profit of $50,000.What is the average target markup percentage for setting prices as a percentage of variable manufacturing costs?

Under absorption costing,fixed manufacturing costs are used to calculate ________.

Timmerman Company has budgeted sales of $30,000 with the following budgeted costs: Required: Compute the average target markup percentage for setting prices as a percentage of: A)Total costs B)Total variable costs C)Variable manufacturing costs D)Total manufacturing costs

Sue Company is considering the production of a new product.Sue Company has the following data available: What is the expected profit of the product over the product life cycle?

Target costing sets prices by computing an average cost and then adding a desired markup.

The absorption approach separates manufacturing costs from ________.