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

Marginal cost is the additional cost resulting from producing and selling one additional unit.

Minnesota Company has no beginning and ending inventories,and has the following data about its only product: Fixed manufacturing costs \ 92,000 Fixed selling and administrative costs \ 69,000 Variable manufacturing costs \ 1,030,000 Variable selling and administrative costs \ 120,000 Selling price(per unit) \ 125 Units produced and sold 23,000 Assume there is excess capacity.The company has received a special order for 1,000 units at $60.00 per unit.If the special order is accepted,what will be the effect on net income?

Under the contribution approach to the income statement,the difference between sales and ________ is contribution margin.

Illinois 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 Illinois Company has a target profit of $40,000.The company will produce 1,000 units.The market price is $160 per unit.What is the target cost per unit?

Courts in the United States have ruled that pricing is predatory only if companies set prices below the ________.

Discriminatory pricing is the act of charging different prices to different customers for the same product or service.

Whitney Company has just completed its first year of operations.The company's accountant has prepared an absorption costing income statement for the year as seen below: Sales (35,000 units at \ 25) \8 75,000 Beginning Inventory 0 Cost of Goods Mantifactured (35,000\times\ 12)+\ 160,000= 580,000 Cost of Goods Available 580,000 Ending Inventory 0\ Cost of Goods Sold 580,000 Gross Margin 295,000 Selling and Administrative Expenses 280,000 Net Income \1 5,000 The variable production costs per unit are determined as follows: Direct materials \5 Direct labor 6 Variable production 1 Total variable production costs \1 2 The company's fixed production costs are $160,000 per year.The company's selling and administrative expenses consist of $210,000 per year in fixed expenses and $2 per unit in variable expenses. Required: Prepare the company's income statement in the contribution format.

Many managers set prices by cost plus pricing.What is cost plus pricing? Assume it is a long run decision.

Predatory pricing occurs when a firm sets ________.

Relevant information refers to ________ that will differ among the alternative courses of action.

In managerial accounting,________ can be a reasonable approximation of marginal cost in many situations.

Dakota Company has been producing and selling 42,000 hats a year.There are no beginning and ending inventories.The Dakota Corporation has the capacity to produce 52,000 hats.The following data is available: Selling price per unit \3 0 Variable manufacturing costs per unit \1 3 Variable selling and administrative costs per unit \7 Total fixed manufacturing costs \1 26,000 Total fixed selling and administrative costs \8 4,000 If a special order is accepted for 10,000 hats at a price of $25 per unit,net income would ________.

Fixed indirect production costs affect the calculation of ________ on the absorption income statement.Fixed indirect production costs do NOT affect the calculation of ________ on the contribution income statement.

Cantrall Company is trying to decide which product to manufacture.Expected direct materials costs are $4.00 per unit for each product.The expected direct labor costs are $2.00 per unit for one product and $4.00 per unit for another product.In choosing between the two products,the direct materials costs are ________ and the direct labor costs are ________.

When managers use the decision process to make decisions,which information is used to make predictions about the amount of expected sales for Product XYZ?

Each month Newton Company produces 30,000 units of a product that has variable costs of $70 per unit.Total fixed costs for the month are $99,000.A special order is received for 1,000 units at a price of $80 per unit.Newton Company has adequate capacity for the special order.If Newton Company accepts the special order,what is the profit to Newton Company from the special order?