Question 1

In a perfectly competitive market,which of the following is a primary factor influencing pricing decisions?

Accepted Answer

A)  cost of production 
B)  availability of raw materials in the market 
C)  information on competitor's cost structure 
D)  value customers place on product 
A)  cost of production 
B)  availability of raw materials in the market 
C)  information on competitor's cost structure 
D)  value customers place on product

Question 2

Which of the following costs can be classified into both value-added and non-value-added costs?

Accepted Answer

A)  production control costs 
B)  machine breakdown costs 
C)  rework costs 
D)  direct material costs 
A)  production control costs 
B)  machine breakdown costs 
C)  rework costs 
D)  direct material costs

Question 3

Answer the following questions using the information below:
Jamal, Kareem, Rashid and Associates are in the process of evaluating its new client services for the business consulting division.
• Estate Planning, a new service, incurred $100,000 in development costs and employee training.
• The direct costs of providing this service, which is all labor, averages $27 per hour.
• Other costs for this service are estimated at $400,000 per year.
• The current program for estate planning is expected to last for two years. At that time, a new law will be in place that will require new operating guidelines for the tax consulting.
• Customer service expenses average $95 per client, with each job lasting an average of 400 hours. The current staff expects to bill 40,000 hours for each of the two years the program is in effect. Billing averages $42 per hour.
-What is estimated life-cycle operating income for the first year?

Accepted Answer

A)  $190,500 
B)  $81,000 
C)  $90,500 
D)  $181,000 
A)  $190,500 
B)  $81,000 
C)  $90,500 
D)  $181,000

Question 4

Answer the following questions using the information below:
After conducting a market research study, Ed Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $240. The annual target sales volume for interior doors is 20,000. Ed has target operating income of 20% of sales.
-What is the target cost for each interior door?

Accepted Answer

A)  $288 
B)  $240 
C)  $192 
D)  $48 
A)  $288 
B)  $240 
C)  $192 
D)  $48

Question 5

A company operating in a perfectly competitive market has more leeway to set higher prices than a firm that is a monopolist.

Accepted Answer

A) True 
 B)False

Question 6

Two different approaches to pricing decisions are market based and cost based.

Accepted Answer

A) True 
 B)False

Question 7

What is the primary reason a firm would adopt target costing?

Accepted Answer

The primary reason a firm would adopt ta

Question 8

For long-run pricing decisions,using stable prices has the advantage of ________.

Accepted Answer

A)  minimizing the need to monitor competitor's prices frequently 
B)  reducing the need to change cost structures frequently 
C)  reducing competition 
D)  helping to build buyer-seller relationships 
A)  minimizing the need to monitor competitor's prices frequently 
B)  reducing the need to change cost structures frequently 
C)  reducing competition 
D)  helping to build buyer-seller relationships

Question 9

Henderson Company is in the process of evaluating a new part using the following information.
• Part SLC2002 has one production run each month,each with $16,000 in setup costs.
• Part SLC2002 incurred $40,000 in development costs and is expected to be produced over the next three years.
• Direct costs of producing Part SLC2002 are $56,000 per run of 24,000 parts each.
• Indirect manufacturing costs charged to each run are $88,000.
• Destination charges for each run average $18,000.
• Part SLC2002 is selling for $12.50 in the United States and $25 in all other countries.Sales are one-third domestic and two-thirds exported.
• Sales units equal production units each year.
Required:
a.What are the estimated life-cycle revenues?
b.What is the estimated life-cycle operating income for the first year?

Accepted Answer

The answer of Henderson Company is in the process of...

Question 10

What factors may influence the level of markups?

Accepted Answer

Factors affecting the level of markups i

Question 11

Predatory pricing occurs when companies in an industry conspire in their pricing and production decisions to achieve a price above the competitive price and so restrain trade.

Accepted Answer

A) True 
 B)False

Question 12

A life-cycle budget is usually prepared to budget for costs and production for a period of one year.

Accepted Answer

A) True 
 B)False

Question 13

Predatory pricing is a type of price discrimination that ________.

Accepted Answer

A)  allows prices to be cut to the level of variable costs 
B)  is required when a company declares bankruptcy so that it can sell its remaining goods quickly 
C)  is used in the food industry for perishable goods 
D)  deliberately sets prices very low, sometimes even below costs, to minimize competition 
A)  allows prices to be cut to the level of variable costs 
B)  is required when a company declares bankruptcy so that it can sell its remaining goods quickly 
C)  is used in the food industry for perishable goods 
D)  deliberately sets prices very low, sometimes even below costs, to minimize competition

Question 14

The markup percentage is most likely to be the lowest while using ________ as the cost base.

Accepted Answer

A)  variable manufacturing cost 
B)  variable cost of the product 
C)  manufacturing cost 
D)  full cost of the product 
A)  variable manufacturing cost 
B)  variable cost of the product 
C)  manufacturing cost 
D)  full cost of the product

Question 15

Answer the following questions using the information below:
Weather Inc., manufactures single room sized air conditioners. The cost accounting system estimates manufacturing costs to be $190 per air conditioner, consisting of 75% variable costs and 25% fixed costs. The company has surplus capacity available. It is Weather Inc.'s policy to add a 30% markup to full costs.
-A medium sized motel chain is currently expanding and has decided to create more rooms and air condition all of its rooms,which are currently not air conditioned.Weather Inc.is invited to submit a bid to the motel chain.What per unit price will Weather Inc.most likely bid for this special order of 200 units? Assume that the price is being fixed for a long-term commitment.

Accepted Answer

A)  $190.00 per unit 
B)  $142.50 per unit 
C)  $247.00 per unit 
D)  $230.00 per unit 
A)  $190.00 per unit 
B)  $142.50 per unit 
C)  $247.00 per unit 
D)  $230.00 per unit

Question 16

Answer the following questions using the information below:
Purple Purpose Inc., is in the process of evaluating a new product using the following information:
• A new transformer has two production runs each year, each with $10,000 in setup costs.
• The new transformer incurred $30,000 in development costs and is expected to be produced over the next three years.
• Direct costs of producing the transformers are $40,000 per run of 4,500 transformers each.
• Indirect manufacturing costs charged to each run are $45,000.
• Destination charges for each transformer average $1.00.
• Customer service expenses average $0.20 per transformer.
• The transformers are selling for $25 the first year and will increase by $3 each year thereafter.
• Sales units equal production units each year.
-What are estimated life-cycle revenues?

Accepted Answer

A)  $225,000 
B)  $477,000 
C)  $729,000 
D)  $756,000 
A)  $225,000 
B)  $477,000 
C)  $729,000 
D)  $756,000

Question 17

Life-cycle budgeting and life-cycle costing help highlight ________.

Accepted Answer

A)  an increase in customer-service costs due to using inferior materials 
B)  high production costs caused by a complex design 
C)  large ordering costs due to the great number of component parts used 
D)  an increase in annual operating income resulting from the new product 
A)  an increase in customer-service costs due to using inferior materials 
B)  high production costs caused by a complex design 
C)  large ordering costs due to the great number of component parts used 
D)  an increase in annual operating income resulting from the new product

Question 18

Price discrimination is the practice of charging a higher price for the same product or service when demand approaches the physical limit of the capacity to produce that product or service.

Accepted Answer

A) True 
 B)False

Question 19

Target cost per unit is arrived at by adding the target operating income to the target price of the product.

Accepted Answer

A) True 
 B)False

Question 20

For a company operating in a perfectly competitive market,cost information affects the pricing decisions of the company.

Accepted Answer

A) True 
 B)False

In a perfectly competitive market,which of the following is a primary factor influencing pricing decisions?

Which of the following costs can be classified into both value-added and non-value-added costs?

A company operating in a perfectly competitive market has more leeway to set higher prices than a firm that is a monopolist.

Two different approaches to pricing decisions are market based and cost based.

What is the primary reason a firm would adopt target costing?

For long-run pricing decisions,using stable prices has the advantage of ________.

What factors may influence the level of markups?

Predatory pricing occurs when companies in an industry conspire in their pricing and production decisions to achieve a price above the competitive price and so restrain trade.

A life-cycle budget is usually prepared to budget for costs and production for a period of one year.

Predatory pricing is a type of price discrimination that ________.

The markup percentage is most likely to be the lowest while using ________ as the cost base.

Life-cycle budgeting and life-cycle costing help highlight ________.

Price discrimination is the practice of charging a higher price for the same product or service when demand approaches the physical limit of the capacity to produce that product or service.

Target cost per unit is arrived at by adding the target operating income to the target price of the product.

For a company operating in a perfectly competitive market,cost information affects the pricing decisions of the company.

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

Filters

Exam 13: Pricing Decisions and Cost Management

In a perfectly competitive market,which of the following is a primary factor influencing pricing decisions?

Which of the following costs can be classified into both value-added and non-value-added costs?

A company operating in a perfectly competitive market has more leeway to set higher prices than a firm that is a monopolist.

Two different approaches to pricing decisions are market based and cost based.

What is the primary reason a firm would adopt target costing?

For long-run pricing decisions,using stable prices has the advantage of ________.

What factors may influence the level of markups?

Predatory pricing occurs when companies in an industry conspire in their pricing and production decisions to achieve a price above the competitive price and so restrain trade.

A life-cycle budget is usually prepared to budget for costs and production for a period of one year.

Predatory pricing is a type of price discrimination that ________.

The markup percentage is most likely to be the lowest while using ________ as the cost base.

Life-cycle budgeting and life-cycle costing help highlight ________.

Price discrimination is the practice of charging a higher price for the same product or service when demand approaches the physical limit of the capacity to produce that product or service.

Target cost per unit is arrived at by adding the target operating income to the target price of the product.

For a company operating in a perfectly competitive market,cost information affects the pricing decisions of the company.

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

Filters