Exam 5: Relevant Information for Decision Making With a Focus on Pricing Decisions

Imprecise but relevant information can be useful.

Price elasticity measures the ________.

In considering whether to produce a single product,the associated direct materials and direct labor costs would probably be ________.

Managers may use different markup rates for different categories of costs.

The total manufacturing cost and full cost approaches to pricing often fail to highlight different cost behavior patterns.

The total of all production costs plus the total of all ________ costs equals the full cost of a product.

Sanchez Company has no beginning and ending inventories,and reports the following data about its only product: Direct materials used \ 100,000 Direct labor \ 80,000 Fixed indirect manufacturing \ 100,000 Fixed selling and administrative \ 170,000 Variable indirect manufacturing \ 20,000 Variable selling and administrative \ 90,000 Selling price(per unit) \ 100 Units produced and sold 12,000 Sanchez Company uses the absorption approach to prepare the income statement.What is the manufacturing cost of goods sold?

Kansas Company uses activity-based costing.The company produces and sells 20,000 units at $22 per unit.Kansas Company's product cost is calculated as follows: Variable costs \ 10 per unit Fixed costs \ 2 per unit Setup costs \ 3 per unit Total costs \ 15 per unit A total of 500 setups at a cost of $120 per setup are required to produce the 20,000 units.Kansas Company has received a special order to sell 5,000 units at $12 per unit.Kansas Company has excess capacity available,but these 5,000 units would require 60 setups.If Kansas Company accepts the special order,what is the increase or decrease in net income?

In perfect competition,additional sales will be profitable if ________.

In imperfect competition,firms should produce and sell units until the ________ equals the ________.

Which of the following is an advantage of the absorption approach to pricing products?

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

When managers make decisions,the decision process used has the following steps in the order of occurrence:

Franklin Company uses activity-based costing,and normally produces 1,000,000 units per month.At this level of production,the costs per unit are as follows: Direct materials used \1 4 Direct labor \6 Variable indirect production \ 1 Setup costs \3 For 1,000,000 units,500 setups are required at a cost of $6,000 per setup.The company has received a special order for 100,000 units at $22 per unit.The company has excess capacity.The company estimates that 5 setups will be required for the special order.What is the cost of the special order?

Michigan Company has budgeted the following costs for the production of its only product: Direct Materials \ 35,000 Direct Labor 25,000 Variable indirect production costs 30,000 Fixed indirect production costs 15,000 Variable selling and administrative costs 7,500 Fixed selling and administrative costs 12,500 Total Costs \1 25,000 Michigan Company wants a profit of $50,000,and expects to produce 1,000 units.The market price is $150 per unit.What is the target cost per unit of the product?

The degree to which information is relevant or precise often depends on the degree to which it is qualitative or quantitative.

In imperfect competition,marginal revenue usually decreases as volume increases.

Historical or past information can have an indirect bearing on a manager's decision because ________.

In decision making situations,________ aspects may dominate quantitative aspects in many decisions.

In the long run,the selling price of a product should cover ________.