Question 1

Which of the following is true of long-run pricing?

Accepted Answer

A)  It is fixed at a level that recovers the variable cost of the company and a pre-determined profit markup. 
B)  It is generally a function of the market factors and the cost involved in production is generally not a consideration. 
C)  It is a strategic decision designed to build long-run relationships with customers based on stable and predictable prices. 
D)  It is based only on internal requirements like cost and estimated rate of return as in the long run these requirements are the driving factors of any organization. 
A)  It is fixed at a level that recovers the variable cost of the company and a pre-determined profit markup. 
B)  It is generally a function of the market factors and the cost involved in production is generally not a consideration. 
C)  It is a strategic decision designed to build long-run relationships with customers based on stable and predictable prices. 
D)  It is based only on internal requirements like cost and estimated rate of return as in the long run these requirements are the driving factors of any organization.

Question 2

Companies must always examine their pricing ________.

Accepted Answer

A)  based on the supply of the product 
B)  based on the cost of producing the product 
C)  through the eyes of their customers 
D)  through the eyes of their competitors 
A)  based on the supply of the product 
B)  based on the cost of producing the product 
C)  through the eyes of their customers 
D)  through the eyes of their competitors

Question 3

Knowledge Transfer Associates is in the process of evaluating its new client services for the business systems consulting division. • Server Planning,a new service,incurred $250,000 in development costs.
• The direct costs of providing the service,which is all labor,averages $50 per hour.
• Other costs for this service are estimated at $300,000 per year.
• The current program for server 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 income for both years combined?

Accepted Answer

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

Question 4

Explain the differences between short-run pricing decisions and long-run pricing decisions.

Accepted Answer

Short-run pricing decisions typically ha

Question 5

Costing systems measure ________.

Accepted Answer

A)  locked in costs 
B)  sunk costs 
C)  cost incurrence 
D)  out of pocked costs 
A)  locked in costs 
B)  sunk costs 
C)  cost incurrence 
D)  out of pocked costs

Question 6

Answer the following questions using the information below:
Sales of Blair Inc. have been on a steady decline for the last 12 months. A market research study conducted revealed that the product of Blair Inc. can be sold only for $400 as opposed to the current market price charged of $500 per unit. Blair Inc. has decided to revise its sales price to $400. The annual sales target volume of the product after price revision is 200 units. Blair Inc. wants to earn 18% on its sales amount.
-What are the target sales revenues?

Accepted Answer

A)  $94,400 
B)  $80,000 
C)  $65,600 
D)  $18,000 
A)  $94,400 
B)  $80,000 
C)  $65,600 
D)  $18,000

Question 7

Customer life-cycle costs do not influence the prices a company can charge for its products.

Accepted Answer

A) True 
 B)False

Question 8

In markets with little or no competition,the key factor affecting price is the cost of production to the company.

Accepted Answer

A) True 
 B)False

Question 9

Reverse engineering is a systematic evaluation of all aspects of the value chain with the

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is an advantage of using full cost of the product as the cost base?

Accepted Answer

A)  Managers are informed regarding the minimum long-run cost they need to recover to stay in business. 
B)  Using the full cost of the product as a basis for pricing increases the temptation to cut prices below full costs. 
C)  Fixed cost allocations can be arbitrary while using full cost of the product as the cost base. 
D)  It requires a detailed analysis of cost behavior for computations and hence promotes a better understanding of the cost behavior. 
A)  Managers are informed regarding the minimum long-run cost they need to recover to stay in business. 
B)  Using the full cost of the product as a basis for pricing increases the temptation to cut prices below full costs. 
C)  Fixed cost allocations can be arbitrary while using full cost of the product as the cost base. 
D)  It requires a detailed analysis of cost behavior for computations and hence promotes a better understanding of the cost behavior.

Question 11

Clark Manufacturing offers two product lines,IN2 and EL5.The demand of the IN2 product line is inelastic,while the demand of the EL5 product line is very elastic.If Clark initiates a price increase for both product lines,how will customer demand change? How will the price increase affect operating profits?

Accepted Answer

For the inelastic product line,when pric

Question 12

Three major influences on pricing decisions are ________.

Accepted Answer

A)  competition, costs, and customers 
B)  competition, demand, and production efficiency 
C)  continuous improvement, customer satisfaction, and supply 
D)  variable costs, fixed costs, and mixed costs 
A)  competition, costs, and customers 
B)  competition, demand, and production efficiency 
C)  continuous improvement, customer satisfaction, and supply 
D)  variable costs, fixed costs, and mixed costs

Question 13

Sandra Clothing Company has invested $48,000,000 in its business.The target rate of return for the company is 15%.It has long-term assets of $20,000,000.Cost of debt for the company is 12%.It expects to sell 8,000 units in the upcoming year.What will be the target operating income per unit for Sandra Clothing Company?

Accepted Answer

A)  $300 
B)  $375 
C)  $720 
D)  $900 
A)  $300 
B)  $375 
C)  $720 
D)  $900

Question 14

Cost bases that include fewer costs also have lower markups.

Accepted Answer

A) True 
 B)False

Question 15

Markups tend to be higher in more competitive markets.

Accepted Answer

A) True 
 B)False

Question 16

A full-cost formula for pricing does not require the management accountant to perform a detailed analysis of cost-behavior patterns to separate product costs into variable and fixed components.

Accepted Answer

A) True 
 B)False

Question 17

Answer the following questions using the information below:
Judith Vending Company has invested $800,000 in a plant to make vending machines. The target operating income desired from the plant is $120,000 annually. The company plans annual sales of 1,200 vending machines at a selling price of $1,000 each.
-What is the cost base of each vending machine for Judith Vending Company?

Accepted Answer

A)  $1,000 
B)  $950 
C)  $900 
D)  $850 
A)  $1,000 
B)  $950 
C)  $900 
D)  $850

Question 18

Companies should only produce and sell units as long as ________.

Accepted Answer

A)  there is customer demand for the product 
B)  the competition allows it 
C)  the revenue from an additional unit exceeds the cost of producing it 
D)  there is a generous supply of low-cost direct materials 
A)  there is customer demand for the product 
B)  the competition allows it 
C)  the revenue from an additional unit exceeds the cost of producing it 
D)  there is a generous supply of low-cost direct materials

Question 19

A value-added cost is a cost that,if eliminated,would increase the actual or perceived value or utility (usefulness)customers experience from using the product or service.

Accepted Answer

A) True 
 B)False

Question 20

Using only the variable cost as a base may tempt managers to cut prices as long as prices are above variable cost.

Accepted Answer

A) True 
 B)False

Which of the following is true of long-run pricing?

Companies must always examine their pricing ________.

Explain the differences between short-run pricing decisions and long-run pricing decisions.

Costing systems measure ________.

Customer life-cycle costs do not influence the prices a company can charge for its products.

In markets with little or no competition,the key factor affecting price is the cost of production to the company.

Reverse engineering is a systematic evaluation of all aspects of the value chain with the

Which of the following is an advantage of using full cost of the product as the cost base?

Three major influences on pricing decisions are ________.

Cost bases that include fewer costs also have lower markups.

Markups tend to be higher in more competitive markets.

A full-cost formula for pricing does not require the management accountant to perform a detailed analysis of cost-behavior patterns to separate product costs into variable and fixed components.

Companies should only produce and sell units as long as ________.

A value-added cost is a cost that,if eliminated,would increase the actual or perceived value or utility (usefulness)customers experience from using the product or service.

Using only the variable cost as a base may tempt managers to cut prices as long as prices are above variable cost.

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

Which of the following is true of long-run pricing?

Companies must always examine their pricing ________.

Explain the differences between short-run pricing decisions and long-run pricing decisions.

Costing systems measure ________.

Customer life-cycle costs do not influence the prices a company can charge for its products.

In markets with little or no competition,the key factor affecting price is the cost of production to the company.

Reverse engineering is a systematic evaluation of all aspects of the value chain with the

Which of the following is an advantage of using full cost of the product as the cost base?

Three major influences on pricing decisions are ________.

Cost bases that include fewer costs also have lower markups.

Markups tend to be higher in more competitive markets.

A full-cost formula for pricing does not require the management accountant to perform a detailed analysis of cost-behavior patterns to separate product costs into variable and fixed components.

Companies should only produce and sell units as long as ________.

A value-added cost is a cost that,if eliminated,would increase the actual or perceived value or utility (usefulness)customers experience from using the product or service.

Using only the variable cost as a base may tempt managers to cut prices as long as prices are above variable cost.

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