Question 1

________ focuses on reducing costs during the manufacturing stage.

Accepted Answer

A)  Target costing 
B)  Kaizen costing 
C)  Cost-plus pricing 
D)  Life-cycle costing 
A)  Target costing 
B)  Kaizen costing 
C)  Cost-plus pricing 
D)  Life-cycle costing

Question 2

What are the undesirable effects of value engineering and target costing? How can these be reduced?

Accepted Answer

Unless managed properly,value engineerin

Question 3

Which of the following is an example of value added cost?

Accepted Answer

A)  cost of machine breakdown 
B)  cost of defective products 
C)  rework costs 
D)  direct machining costs 
A)  cost of machine breakdown 
B)  cost of defective products 
C)  rework costs 
D)  direct machining costs

Question 4

The target rate of return on investment is another way of referring to the markup percentage.

Accepted Answer

A) True 
 B)False

Question 5

Answer the following questions using the information below:
Block Island TV currently sells large televisions for $360. It has costs of $280. A competitor is bringing a new large television to market that will sell for $300. Management believes it must lower the price to $300 to compete in the market for large televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Block Island TV sales are currently 100,000 televisions per year.
-What is the target cost if the company wants to maintain its same income level,and marketing is correct (rounded to the nearest cent)?

Accepted Answer

A)  $225.00 
B)  $227.27 
C)  $246.68 
D)  $280.00 
A)  $225.00 
B)  $227.27 
C)  $246.68 
D)  $280.00

Question 6

Life-cycle budgeting estimates the costs and revenues attributed to a product from its initial R&D through production of a prototype product.

Accepted Answer

A) True 
 B)False

Question 7

A locked-in cost is a(n)________.

Accepted Answer

A)  opportunity cost that is fixed in the short run 
B)  cost that can be changed in the short run 
C)  cost that has not yet been incurred, but based on decisions that have already been made, will be incurred in the future 
D)  cost that has been incurred, but based on decisions that have already been made, will be not incurred in the future 
A)  opportunity cost that is fixed in the short run 
B)  cost that can be changed in the short run 
C)  cost that has not yet been incurred, but based on decisions that have already been made, will be incurred in the future 
D)  cost that has been incurred, but based on decisions that have already been made, will be not incurred in the future

Question 8

Target pricing is a form of cost-based pricing.

Accepted Answer

A) True 
 B)False

Question 9

Companies must always examine pricing decisions through the eyes of their creditors.

Accepted Answer

A) True 
 B)False

Question 10

The cost-plus pricing approach is generally in the form ________.

Accepted Answer

A)  Cost base + Markup component = Prospective selling price 
B)  Prospective selling price - Cost base = Markup component 
C)  Cost base + Gross margin = Prospective selling price 
D)  Variable cost + Fixed cost + Contribution margin = Prospective selling price 
A)  Cost base + Markup component = Prospective selling price 
B)  Prospective selling price - Cost base = Markup component 
C)  Cost base + Gross margin = Prospective selling price 
D)  Variable cost + Fixed cost + Contribution margin = Prospective selling price

Question 11

Which of the following is an

Accepted Answer

A)  to reduce cost by eliminating all value-added activities 
B)  to streamline and add non-value added activities 
C)  to reduce the total cost of the product 
D)  to understand competitors' product design 
A)  to reduce cost by eliminating all value-added activities 
B)  to streamline and add non-value added activities 
C)  to reduce the total cost of the product 
D)  to understand competitors' product design

Question 12

Claudia Geer,controller,discusses the pricing of a new product with the sales manager,James Nolan.What major influences must Claudia and James consider in pricing the new product? Discuss each briefly.

Accepted Answer

The major influences are customers,compe

Question 13

When is a company said to be engaged in predatory pricing? What are the primary conditions to be satisfied to prove predatory pricing?

Accepted Answer

A company is said to be engaged in preda

Question 14

If U.S dollar strengthens against the Japanese Yen,Japanese producers selling goods in U.S markets will have to increase the prices of products to recover the extra cost arising from currency fluctuation.

Accepted Answer

A) True 
 B)False

Question 15

What advice would you give a company to avoid the appearance of predatory pricing?

Accepted Answer

Useful advice for a company to avoid the

Question 16

Customer life-cycle costs are the ________.

Accepted Answer

A)  costs incurred by the selling company to satisfy the customer. 
B)  refer to the costs to the customers for buying and using a product. 
C)  same as the selling life-cycle prices. 
D)  replacement costs of using a product or service. 
A)  costs incurred by the selling company to satisfy the customer. 
B)  refer to the costs to the customers for buying and using a product. 
C)  same as the selling life-cycle prices. 
D)  replacement costs of using a product or service.

Question 17

In relation to target costing,which of the following best describes target cost per unit?

Accepted Answer

A)  It is the targeted cost of producing one unit to achieve the current year's budgeted profit. 
B)  It is the estimated long-run cost of a product that enables the company to achieve its target operating income. 
C)  It is the cost that can be achieved by ensuring that the company produced its products at maximum efficiency. 
D)  It is the budgeted cost that the company estimates in producing a unit in the current budget period. 
A)  It is the targeted cost of producing one unit to achieve the current year's budgeted profit. 
B)  It is the estimated long-run cost of a product that enables the company to achieve its target operating income. 
C)  It is the cost that can be achieved by ensuring that the company produced its products at maximum efficiency. 
D)  It is the budgeted cost that the company estimates in producing a unit in the current budget period.

Question 18

Customer life-cycle costs focus on the total costs incurred by a customer to acquire,use,maintain,and dispose of a product or service.

Accepted Answer

A) True 
 B)False

Question 19

The Maize Eagles are evaluating ticket prices for its basketball games.Studies show that Friday and Saturday night games average more than twice the number of fans compared to other days.The following information pertains to the stadium's normal operations per season: $\begin{array}{lrl}
\text { Average fans per game (all games) } & 2,500  \text { fans } \
\text { Average fans per Friday and Saturday night games } & 3,500  \text { fans } \
\text { Number of home games per æeason } & 30  \text { games } \
\text { Stadium capacity } & 3,500  \text { seats }\\text { Variable operating costs per operating hour } & \$ 2,000 \
\text { Marketing costs per season for basketball } & \$ 138,750 \
\text { Customer-service costs per season for basketball } & \$ 25,000
\end{array}$ The stadium is open for 5 operating hours on each day a game is played.All employees work by the hour except for the administrators.A maximum of one game is played per day and each fan has only one ticket per game.
The stadium authority wants to charge more for games on Friday and Saturday.What is the minimum price that should be charged for peak attendance nights?

Accepted Answer

A)  $4.40 
B)  $8.60 
C)  $6.19 
D)  $171.45 
A)  $4.40 
B)  $8.60 
C)  $6.19 
D)  $171.45

Question 20

To prove predatory pricing,one of conditions established by the U.S.Supreme Court is that the company should be charging a price below 60% of its total costs.

Accepted Answer

A) True 
 B)False

Exam 13: Pricing Decisions and Cost Management

________ focuses on reducing costs during the manufacturing stage.

What are the undesirable effects of value engineering and target costing? How can these be reduced?

Which of the following is an example of value added cost?

The target rate of return on investment is another way of referring to the markup percentage.

Life-cycle budgeting estimates the costs and revenues attributed to a product from its initial R&D through production of a prototype product.

A locked-in cost is a(n)________.

Target pricing is a form of cost-based pricing.

Companies must always examine pricing decisions through the eyes of their creditors.

The cost-plus pricing approach is generally in the form ________.

Which of the following is an

Claudia Geer,controller,discusses the pricing of a new product with the sales manager,James Nolan.What major influences must Claudia and James consider in pricing the new product? Discuss each briefly.

When is a company said to be engaged in predatory pricing? What are the primary conditions to be satisfied to prove predatory pricing?

If U.S dollar strengthens against the Japanese Yen,Japanese producers selling goods in U.S markets will have to increase the prices of products to recover the extra cost arising from currency fluctuation.

What advice would you give a company to avoid the appearance of predatory pricing?

Customer life-cycle costs are the ________.

In relation to target costing,which of the following best describes target cost per unit?

Customer life-cycle costs focus on the total costs incurred by a customer to acquire,use,maintain,and dispose of a product or service.

To prove predatory pricing,one of conditions established by the U.S.Supreme Court is that the company should be charging a price below 60% of its total costs.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

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

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