Exam 13: Pricing Decisions and Cost Management

When materials and supplies are used in a production facility to assemble and finish a product that will be sold to customers,the usage of the materials and supplies is described as:

A hotel in Orlando,Florida,experiences peak periods and slower times.How should prices be adjusted during peak periods? During slow times? Why?

Price dumping occurs when a domestic company is trying to get rid of out-of-style products at a substantially reduced price.

Markups tend to be higher in more competitive markets.

Cost allocation is not required to cost inventories for reporting to external parties.

Sail Safe currently sells motor boats for $60,000.It has costs of $46,500.A competitor is bringing a new motor boat to the market that will sell for $55,000.Management believes it must lower the price to $55,000 to compete in the market for motor boats.The marketing department believes that the new price will cause sales to increase by 12.5%,even with a new competitor in the market.Sail Safe's sales are currently 2,000 motor boats per year.3 Required: a.What is the target cost for the new target price if target operating income is 20% of sales? b.What is the change in operating income if marketing department is correct and only the sales price is changed? c.What is the target cost if the company wants to maintain its same income level,and marketing department is correct?

Claudia Geer,controller,discusses the pricing of a new product with the sales manager,James Nolan.What major influences must Claudia and James consider in pricing the new product? Discuss each briefly.

Harry and Sally are starting a new business venture and are in the process of evaluating their product lines.Information for one new product,hand-made lamps,is as follows: Required: a.What are the estimated life-cycle revenues? b.What is the estimated life-cycle operating income for the first year?

What are the five steps that are followed while implementing target pricing and target costing?

Companies operating in competitive markets generally use the cost-plus approach to price products.

Which of the following statements about pricing is true?

Which of the following examples would have as its purpose the allocation of costs to motivate employees?

Value engineering seeks to reduce value-added costs as well as nonvalue-added costs.

What advice would you give a company to avoid the appearance of predatory pricing?

Fairhaven Composite Poles manufactures fishing poles that have a price of $125.00.It has costs of $90.A competitor is introducing a new fishing pole that will sell for $115.00.Management believes it must lower the price to $110.00 to compete in the highly cost-conscious fishing pole market.Marketing department believes that the new price will allow Carbon to maintain the current sales level of 200,000 poles per year. Required: a.What is the target cost for the new price if target operating income is 25% of sales? b.What is the change in operating income for the year if only the selling price is changed and costs remain the same? c.What is the target cost per unit if the selling price is reduced to $110.00 and the company wants to maintain its same income level?

Which of the following is true of target costing?

Franklin Company is in the process of evaluating a new part using the following information. Required: a.What are the estimated life-cycle revenues? b.What is the estimated life-cycle operating income for the first year?

Golden Generator Supply is approached by Mr.Stephen,a new customer,to fulfill a large one-time-only special order for a product similar to one offered to regular customers.Golden Generator Supply has excess capacity.The following per unit data apply for sales to regular customers: Direct materials \ 1800.00 Direct manufacturing labor 130.00 Variable manufacturing support 210.00 Fixed manufacturing support Total manufacturing costs 2290.00 Markup (20\% of total manufacturing costs) Estimated selling price \ 2748.00 For Golden Generator Supply,what is the minimum acceptable price of this one-time-only special order?

Relevant costs for target pricing are ________.

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 year?