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 D

Question 2

Which of the following is an objective of value engineering?

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 C

Question 3

Velim Electronics manufactures electric shavers and is considering decreasing the price by $3 a unit for the coming year.With a $3 price decrease,the unit demand is expected to increase by 25%,and a high volume materials discount is expected to decrease the variable costs per unit by $2 per unit.
$\begin{array}{lll}
 & \text { Currently } & \text { Projected } \
\text { Demand } & 50,000 \text { units } & 62,500 \text { units } \
\text { Selling price } & \$ 60 & \$ 57 \
\text { Variable costs per unit } & \$ 52 & \$ 50
\end{array}$
Would you recommend the $3 price decrease?

Accepted Answer

A) Yes,because demand decreases. 
B) No,because the selling price decreases. 
C) Yes,because operating income increases. 
D) No,because contribution margin per unit increases. 
A) Yes,because demand decreases. 
B) No,because the selling price decreases. 
C) Yes,because operating income increases. 
D) No,because contribution margin per unit increases. C

Question 4

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

Accepted Answer

The primary reason a firm would adopt ta

Question 5

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 6

Which of the following is true of target pricing?

Accepted Answer

A) it is used for short-term pricing decisions. 
B) it is one form of cost-based pricing. 
C) a price is an estimate of customers' perceived value of the product. 
D) a price is calculated by adding a markup component to the cost base. 
A) it is used for short-term pricing decisions. 
B) it is one form of cost-based pricing. 
C) a price is an estimate of customers' perceived value of the product. 
D) a price is calculated by adding a markup component to the cost base.

Question 7

The Big Tool Company has budgeted sales of $300,000 with the following budgeted costs:
 $\begin{array}{lc}
\text { Direct materials } & \$ 60,000 \
\text { Direct manufacturing labor } & 35,000 \
\text { Factory overhead } & \
\quad \text { Variable } & 30,000 \
\quad \text { Fixed } & 45,000 \
\text { Selling and administrative expenses } & \
\quad \text { Variable } & 20,000 \
\quad \text { Fixed } & 25,000
\end{array}$ 
Compute the average markup percentage for setting prices as a percentage of:
a.The full cost of the product
b.The variable cost of the product
c.Variable manufacturing costs
d.Total manufacturing costs

Accepted Answer

a.$60,000 + $35,000 + $30,000 + $45,000

Question 8

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 9

Troy City Inc. ,manufactures a product and is considering raising the price by $20 a unit for the coming year.With a $20 price increase,demand is expected to fall by 2500 units.
 
Would you recommend the $20 price increase?

Accepted Answer

A) No,because demand decreased. 
B) No,because the contribution margin decreases. 
C) Yes,because inventory turnover increases. 
D) Yes,because operating income increases. 
A) No,because demand decreased. 
B) No,because the contribution margin decreases. 
C) Yes,because inventory turnover increases. 
D) Yes,because operating income increases.

Question 10

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

Question 11

Which of the following is regarded as a purpose of cost allocation?

Accepted Answer

A) It helps in identifying the potential customers for a product. 
B) It provides the profit margin earned. 
C) It helps in maintaining decorum among managers. 
D) It provides information for economic decisions. 
A) It helps in identifying the potential customers for a product. 
B) It provides the profit margin earned. 
C) It helps in maintaining decorum among managers. 
D) It provides information for economic decisions.

Question 12

An example of why a manager would perform cost allocations for economic decisions would be to cost inventories for reporting to the tax authorities.

Accepted Answer

A) True 
 B)False

Question 13

After conducting a market research study,Magnificent 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 $250.The annual target sales volume for interior doors is 28,000.Magnificent has target operating income of 40% of sales.
What is the target operating income?

Accepted Answer

A) $2,800,000 
B) $4,200,000 
C) $7,000,000 
D) $9,800,000 
A) $2,800,000 
B) $4,200,000 
C) $7,000,000 
D) $9,800,000

Question 14

Crimpson Company has invested $2,200,000 in a plant to make commercial juicer machines.The target operating income desired from the plant is $303,000 annually.The company plans annual sales of 7000 juicer machines at a selling price of $500 each.
What is the markup percentage as a percentage of cost for Crimpson Company?

Accepted Answer

A) 8)7% 
B) 13.8% 
C) 9)5% 
D) 0)9% 
A) 8)7% 
B) 13.8% 
C) 9)5% 
D) 0)9%

Question 15

Jackson Company has budgeted sales of $810,000 with the following budgeted costs:
 $\begin{array}{ll}
\text { Direct materials } & \$ 168,000 \
\text { Direct manufacturing labor } & 140,000 \
\text { Factory overhead } & \
\quad \text { Variable } & 98,000 \
\quad \text { Fixed } & 108,000 \
\text { Selling and administrative expenses } & \
\quad \text { Variable } & 72,000 \
\quad \text { Fixed } & 100,000
\end{array}$ 
Compute the average markup percentage for setting prices as a percentage of:
a.Total manufacturing costs
b.The variable cost of the product
c.The full cost of the product
d.Variable manufacturing costs

Accepted Answer

a.$168,000 + $140,000 + $98,000 + $108,0

Question 16

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 17

Life-cycle budgeting and life-cycle costing can help highlight which of the following measures?

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

Expo Manufacturing Inc. ,is in the process of evaluating a new product using the following information:
 
What is the estimated life-cycle operating income for the first three years?

Accepted Answer

A) $556,170 
B) $2,221,170 
C) $179,590 
D) $2,196,970 
A) $556,170 
B) $2,221,170 
C) $179,590 
D) $2,196,970

Question 19

Roberto Inc. ,operates a chain of luxury hotels in the Asia-Pacific region.It charges $150 for one night stay.However when 90% of the rooms are occupied,Roberto charges a premium of 20% on room tariff for the remaining rooms.What pricing method has Roberto Inc.adopted?

Accepted Answer

A) customer-preference pricing 
B) seasonal-load pricing 
C) peak-load pricing 
D) capacity pricing 
A) customer-preference pricing 
B) seasonal-load pricing 
C) peak-load pricing 
D) capacity pricing

Question 20

Quick Connect manufactures high-tech cell phones.Quick Connect has a policy of adding a 25% markup to full costs and currently has excess capacity.The following information pertains to the company's normal operations per month:
 
Quick Connect Products is approached by an overseas customer to fulfill a one-time-only special order for 150 units.All cost relationships remain the same except for a one-time setup charge of $2025.No additional design,marketing,or distribution costs will be incurred.What is the minimum acceptable bid per unit on this one-time-only special order?

Accepted Answer

A) $30.20 
B) $173.20 
C) $186.70 
D) $188.50 
A) $30.20 
B) $173.20 
C) $186.70 
D) $188.50

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

Which of the following is an objective of value engineering?

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

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

Which of the following is true of target pricing?

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.

Troy City Inc. ,manufactures a product and is considering raising the price by $20 a unit for the coming year.With a $20 price increase,demand is expected to fall by 2500 units. Would you recommend the $20 price increase?

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.

Which of the following is regarded as a purpose of cost allocation?

An example of why a manager would perform cost allocations for economic decisions would be to cost inventories for reporting to the tax authorities.

Predatory pricing is a type of price discrimination that ________.

Life-cycle budgeting and life-cycle costing can help highlight which of the following measures?

Expo Manufacturing Inc. ,is in the process of evaluating a new product using the following information: What is the estimated life-cycle operating income for the first three years?

Roberto Inc. ,operates a chain of luxury hotels in the Asia-Pacific region.It charges $150 for one night stay.However when 90% of the rooms are occupied,Roberto charges a premium of 20% on room tariff for the remaining rooms.What pricing method has Roberto Inc.adopted?

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 is an objective of value engineering?

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

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

Which of the following is true of target pricing?

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.

Troy City Inc. ,manufactures a product and is considering raising the price by $20 a unit for the coming year.With a $20 price increase,demand is expected to fall by 2500 units. Would you recommend the $20 price increase?

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.

Which of the following is regarded as a purpose of cost allocation?

An example of why a manager would perform cost allocations for economic decisions would be to cost inventories for reporting to the tax authorities.

Predatory pricing is a type of price discrimination that ________.

Life-cycle budgeting and life-cycle costing can help highlight which of the following measures?

Expo Manufacturing Inc. ,is in the process of evaluating a new product using the following information: What is the estimated life-cycle operating income for the first three years?

Roberto Inc. ,operates a chain of luxury hotels in the Asia-Pacific region.It charges $150 for one night stay.However when 90% of the rooms are occupied,Roberto charges a premium of 20% on room tariff for the remaining rooms.What pricing method has Roberto Inc.adopted?

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