Question 1

Sellers that set a target price have an idea of the amount of operating profit that they expect from setting that price.

Accepted Answer

A) True 
 B)False

Question 2

What is the effect of spreading fixed manufacturing costs over a shrinking budgeted capacity utilisation amount?

Accepted Answer

A) Increased unit costs 
B) Greater utilisation of capacity 
C) Greater demand for the product 
D) More competitive selling prices 
A) Increased unit costs 
B) Greater utilisation of capacity 
C) Greater demand for the product 
D) More competitive selling prices

Question 3

Budgeted fixed manufacturing costs of a product using practical capacity:

Accepted Answer

A) should be used to evaluate a marketing manager's performance in the current year. 
B) can result in setting selling prices that are not competitive. 
C) includes the cost of unused capacity. 
D) represents the cost per unit of supplying capacity. 
A) should be used to evaluate a marketing manager's performance in the current year. 
B) can result in setting selling prices that are not competitive. 
C) includes the cost of unused capacity. 
D) represents the cost per unit of supplying capacity.

Question 4

For benchmarking purposes,it is best to use budgeted capacity because all competitors use about the same capacity for production.

Accepted Answer

A) True 
 B)False

Question 5

Direct material costs are locked in when they are:

Accepted Answer

A) sold. 
B) designed. 
C) assembled. 
D) delivered. 
A) sold. 
B) designed. 
C) assembled. 
D) delivered.

Question 6

________ reduces theoretical capacity for unavoidable operating interruptions.

Accepted Answer

A) Normal capacity utilisation 
B) Theoretical capacity 
C) Practical capacity 
D) Budgeted capacity utilisation 
A) Normal capacity utilisation 
B) Theoretical capacity 
C) Practical capacity 
D) Budgeted capacity utilisation

Question 7

Answer the following questions using the information below:
Elliott Manufacturing has decided to produce a new interior door to complement its exterior door line.The new door is expected to sell for $60 each,and the annual target sales volume for the doors is 20 000.Elliott has target operating profit of 20% of sales.
-What is the target cost for each interior door?

Accepted Answer

A) $48 
B) $58 
C) $45 
D) $60 
A) $48 
B) $58 
C) $45 
D) $60

Question 8

What are the major influences that must be considered when pricing a new product? Discuss each briefly.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The major influences are customers,compe

Question 9

Answer the following questions using the information below:
Davidson,Lindwall Associates is in the process of evaluating its new client services for the business systems consulting division.
∙ Distribution planning,a new service,incurred $250 000 in development costs.
∙ The direct costs of providing the service,which is all labour,averages $50 per hour.
∙ Other costs for this service are estimated at $300 000 per year.
∙ The current program for Distribution planning is expected to last for two years.At that time,expected new operating systems are likely to make the service non-viable.
∙ Customer service expenses average $250 per client,with each job lasting an average of 40 hours.The current staff expects to bill 15 000 hours for each of the two years the program is in effect.Billing averages $90 per hour.
-What is the estimated life-cycle operating profit for the first year?

Accepted Answer

A) $162 500 
B) $43 750 
C) $(43 750) 
D) $206 250 
A) $162 500 
B) $43 750 
C) $(43 750) 
D) $206 250

Question 10

Long-run pricing decisions include:

Accepted Answer

A) adjusting product mix and output volume in a competitive market. 
B) pricing a one-time-only special order. 
C) pricing a product in a major market in which there is some leeway in setting price. 
D) None of the above. 
A) adjusting product mix and output volume in a competitive market. 
B) pricing a one-time-only special order. 
C) pricing a product in a major market in which there is some leeway in setting price. 
D) None of the above.

Question 11

The use of theoretical capacity results in an unrealistically low fixed manufacturing cost per unit because it is based on:

Accepted Answer

A) real available capacity. 
B) normal capacity utilisation. 
C) an unattainable level of capacity. 
D) normal costing. 
A) real available capacity. 
B) normal capacity utilisation. 
C) an unattainable level of capacity. 
D) normal costing.

Question 12

Answer the following questions using the information below:
Davidson,Lindwall Associates is in the process of evaluating its new client services for the business systems consulting division.
∙ Distribution planning,a new service,incurred $250 000 in development costs.
∙ The direct costs of providing the service,which is all labour,averages $50 per hour.
∙ Other costs for this service are estimated at $300 000 per year.
∙ The current program for Distribution planning is expected to last for two years.At that time,expected new operating systems are likely to make the service non-viable.
∙ Customer service expenses average $250 per client,with each job lasting an average of 40 hours.The current staff expects to bill 15 000 hours for each of the two years the program is in effect.Billing averages $90 per hour.
-What is the estimated life-cycle operating profit for both years combined?

Accepted Answer

A) $(87 500) 
B) $162 500 
C) $(43 750) 
D) $206 250 
A) $(87 500) 
B) $162 500 
C) $(43 750) 
D) $206 250

Question 13

Answer the following questions using the information below:
Potter Products has produced an electric coffee pot to complement its range of kitchen products.The new coffee pot can be sold at a target price of $46,and annual target sales volume for the coffee pot is 250 000.Potter has target operating profit of 20% of sales.
-What is the target cost for each coffee pot?

Accepted Answer

A) $42.15 
B) $36.80 
C) $35.50 
D) $46.00 
A) $42.15 
B) $36.80 
C) $35.50 
D) $46.00

Question 14

a.List the four different measures of capacity.
b.Which measure of capacity is best for setting prices? Why?
c.Which measure of capacity is best for evaluating the performance of the marketing manager for the current year? Why?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.Theoretical capacity,practical capacit

Question 15

'Theoretical capacity' is the capacity level that represents what the firm is able to obtain under reasonable circumstances.

Accepted Answer

A) True 
 B)False

Question 16

Although the Australian Taxation Office (ATO)requires that business taxpayers ascertain the cost of
inventory using absorption costing,it does not specify the capacity concept that the taxpayer should use to calculate the fixed production cost per unit.

Accepted Answer

A) True 
 B)False

Question 17

A(n)________ represents something that one or more people within an organisation do to assist
In achieving its objective.

Accepted Answer

A) value 
B) activity 
C) capacity 
D) supply chain 
A) value 
B) activity 
C) capacity 
D) supply chain

Question 18

Graphic analysis of incurred and locked-in costs provides several insights as to how the different concepts influence decisions.Which of the following statements is FALSE?

Accepted Answer

A) When and how costs are locked in are more important than when and how costs are incurred. 
B) Costs are generally locked in before they are incurred. 
C) Most costs are locked in during the manufacturing process. 
D) After a product's design has been approved,costs are difficult to influence. 
A) When and how costs are locked in are more important than when and how costs are incurred. 
B) Costs are generally locked in before they are incurred. 
C) Most costs are locked in during the manufacturing process. 
D) After a product's design has been approved,costs are difficult to influence.

Question 19

With which of the following do managers face uncertainty when estimating?

Accepted Answer

A) Demand of the product 
B) Total fixed manufacturing costs for the next accounting period 
C) The denominator level for practical capacity 
D) All of these answers are correct. 
A) Demand of the product 
B) Total fixed manufacturing costs for the next accounting period 
C) The denominator level for practical capacity 
D) All of these answers are correct.

Question 20

Challenges only result from estimating the denominator level,but not the costs in the numerator of the fixed manufacturing cost rate.

Accepted Answer

A) True 
 B)False

Sellers that set a target price have an idea of the amount of operating profit that they expect from setting that price.

What is the effect of spreading fixed manufacturing costs over a shrinking budgeted capacity utilisation amount?

Budgeted fixed manufacturing costs of a product using practical capacity:

For benchmarking purposes,it is best to use budgeted capacity because all competitors use about the same capacity for production.

Direct material costs are locked in when they are:

________ reduces theoretical capacity for unavoidable operating interruptions.

What are the major influences that must be considered when pricing a new product? Discuss each briefly. _ _

Long-run pricing decisions include:

The use of theoretical capacity results in an unrealistically low fixed manufacturing cost per unit because it is based on:

a.List the four different measures of capacity. b.Which measure of capacity is best for setting prices? Why? c.Which measure of capacity is best for evaluating the performance of the marketing manager for the current year? Why? _ _

'Theoretical capacity' is the capacity level that represents what the firm is able to obtain under reasonable circumstances.

Although the Australian Taxation Office (ATO)requires that business taxpayers ascertain the cost of inventory using absorption costing,it does not specify the capacity concept that the taxpayer should use to calculate the fixed production cost per unit.

A(n)________ represents something that one or more people within an organisation do to assist In achieving its objective.

Graphic analysis of incurred and locked-in costs provides several insights as to how the different concepts influence decisions.Which of the following statements is FALSE?

With which of the following do managers face uncertainty when estimating?

Challenges only result from estimating the denominator level,but not the costs in the numerator of the fixed manufacturing cost rate.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters

Exam 7: Target Costing, Managing Activities and Managing Capacity

Sellers that set a target price have an idea of the amount of operating profit that they expect from setting that price.

What is the effect of spreading fixed manufacturing costs over a shrinking budgeted capacity utilisation amount?

Budgeted fixed manufacturing costs of a product using practical capacity:

For benchmarking purposes,it is best to use budgeted capacity because all competitors use about the same capacity for production.

Direct material costs are locked in when they are:

________ reduces theoretical capacity for unavoidable operating interruptions.

What are the major influences that must be considered when pricing a new product? Discuss each briefly. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Long-run pricing decisions include:

The use of theoretical capacity results in an unrealistically low fixed manufacturing cost per unit because it is based on:

'Theoretical capacity' is the capacity level that represents what the firm is able to obtain under reasonable circumstances.

Although the Australian Taxation Office (ATO)requires that business taxpayers ascertain the cost of inventory using absorption costing,it does not specify the capacity concept that the taxpayer should use to calculate the fixed production cost per unit.

A(n)________ represents something that one or more people within an organisation do to assist In achieving its objective.

Graphic analysis of incurred and locked-in costs provides several insights as to how the different concepts influence decisions.Which of the following statements is FALSE?

With which of the following do managers face uncertainty when estimating?

Challenges only result from estimating the denominator level,but not the costs in the numerator of the fixed manufacturing cost rate.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters

What are the major influences that must be considered when pricing a new product? Discuss each briefly. _ _