Question 1

Place the following steps for the implementation of target costing in order:

Accepted Answer

A) B D A C 
B) B A D C 
C) A D B C 
D) A B C D 
A) B D A C 
B) B A D C 
C) A D B C 
D) A B C D

Question 2

Jamal,Kareem,Rashid and Associates are in the process of evaluating its new client services for the business consulting division.
 
What is the estimated life-cycle operating income for the first two years?

Accepted Answer

A) $6,615,000 
B) $1,658,800 
C) $924,400 
D) $734,400 
A) $6,615,000 
B) $1,658,800 
C) $924,400 
D) $734,400

Question 3

Wilde Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
$\begin{array}{ll}
\text { Direct materials } & \$ 1,140,000 \
\text { Direct labor } & 795,000 \
\text { Manufacturing overhead } & \
\text { Variable } & 840,000 \
\quad \text { Fixed } & 700,000 \
\text { Selling and administrative } & \
\quad \text { Variable } & 360,000 \
\quad \text { Fixed } & \underline{\$ 30,000} \
\text { Total costs } & \underline{\$ 4,365,000}
\end{array}$
Wilde has an annual target operating income of $920,000.
The markup percentage for setting prices as a percentage of the variable cost of the product is ________.

Accepted Answer

A) 46.3% 
B) 39.2% 
C) 27.5% 
D) 68.6% 
A) 46.3% 
B) 39.2% 
C) 27.5% 
D) 68.6%

Question 4

Knowledge Transfer Associates is in the process of evaluating its new client services for the business systems consulting division.
 
What is the estimated life-cycle operating income for the first year?

Accepted Answer

A) -$251,250 
B) -$782,500 
C) -$531,250 
D) $531,250 
A) -$251,250 
B) -$782,500 
C) -$531,250 
D) $531,250

Question 5

Peak-load pricing is the practice of charging a lower price for the same product or service when the demand for it approaches the physical limit of the capacity to produce that product or service.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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 8

Twenty Technologies,currently sells 17" monitors for $280.It has costs of $220.A competitor is bringing a new 17" monitor to market that will sell for $230.Management believes it must lower the price to $230 to compete in the market for 17" monitors.Twenty Technologies believes that the new price will cause sales to increase by 10%,even with a new competitor in the market.Twenty Technologies' sales are currently 5100 monitors per year.
What is the target cost if the target operating income is 25% of sales?

Accepted Answer

A) $230.00 
B) $210.00 
C) $172.50 
D) $165.00 
A) $230.00 
B) $210.00 
C) $172.50 
D) $165.00

Question 9

Julian Pharma manufactures hospital beds.Its most popular model,Deluxe,sells for $5,000.It has variable costs totaling $2,650 and fixed costs of $1,200 per unit,based on an average production run of 5,000 units.It normally has four production runs a year,with $400,000 in setup costs each time.Plant capacity can handle up to six runs a year for a total of 30,000 beds.
A competitor is introducing a new hospital bed similar to Deluxe that will sell for $3,800.Management believes it must lower the price to compete.The marketing department believes that the new price will increase sales by 25% a year.The plant manager thinks that production can increase by 25% with the same level of fixed costs.The company currently sells all the Deluxe beds it can produce.
Required:
a.What is the annual operating income from Deluxe at the current price of $5,000?
b.What is the annual operating income from Deluxe if the price is reduced to $3,800 and sales in units increase by 25%?
c.What is the target cost per unit for the new price if target operating income is 30% of sales?

Accepted Answer

@#IMG-DLM&_TB5540_00_TB5540_00

Question 10

Monopolists can charge prices without limitations as there is no competition for the product or service the monopolist provides.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements is true of the cost of producing a product?

Accepted Answer

A) It controls pricing in highly competitive markets. 
B) It affects the willingness of a company to supply a product. 
C) It includes manufacturing costs,but not product design costs for pricing decisions. 
D) It is not a factor to be taken into account while pricing a product. 
A) It controls pricing in highly competitive markets. 
B) It affects the willingness of a company to supply a product. 
C) It includes manufacturing costs,but not product design costs for pricing decisions. 
D) It is not a factor to be taken into account while pricing a product.

Question 12

When is a company said to be engaged in predatory pricing? What are the primary conditions to be satisfied to prove predatory pricing?

Accepted Answer

A company is said to be engaged in preda

Question 13

Explain the difference between locked in costs and costs incurred.Which of these types of costs does a traditional accounting system emphasize? At which stage of the value chain are most costs locked-in? At which stage of the value chain are most costs incurred? What implication does this have for good cost management?

Accepted Answer

Locked-in costs are costs that have not

Question 14

Which of the following scenarios is an example of predatory pricing?

Accepted Answer

A) Ceramic Corp sells its products below average total costs during off-peak seasons. 
B) Almeida flowers has arrived at an informal agreement with other sellers in the area to charge a very high selling price. 
C) Anton Inc. ,sells its products for $25 in the U.S,however it can sell the same product for double the price in its home country. 
D) Duyen Inc. ,is launching a new product and has decided to sell its product below its average variable costs until it drives competitors out of market. 
A) Ceramic Corp sells its products below average total costs during off-peak seasons. 
B) Almeida flowers has arrived at an informal agreement with other sellers in the area to charge a very high selling price. 
C) Anton Inc. ,sells its products for $25 in the U.S,however it can sell the same product for double the price in its home country. 
D) Duyen Inc. ,is launching a new product and has decided to sell its product below its average variable costs until it drives competitors out of market.

Question 15

There are alternative ways of measuring the cost base when applying a cost-plus method to pricing but research shows that many managers prefer to use full cost as the cost base.

Accepted Answer

A) True 
 B)False

Question 16

Twenty Technologies,currently sells 17" monitors for $270.It has costs of $230.A competitor is bringing a new 17" monitor to market that will sell for $245.Management believes it must lower the price to $245 to compete in the market for 17" monitors.Twenty Technologies believes that the new price will cause sales to increase by 10%,even with a new competitor in the market.Twenty Technologies's sales are currently 5200 monitors per year.
What is the change in operating income if marketing manager is correct and only the sales price is changed?

Accepted Answer

A) $130,000 
B) $122,200 
C) ($122,200) 
D) ($130,000) 
A) $130,000 
B) $122,200 
C) ($122,200) 
D) ($130,000)

Question 17

Einstein Motors,has a capacity to produce 38,000 electric cars.Due to a temporary subsidy announced,there is a sudden increase in demand.Einstein decides to adopt peak-load pricing and charge a premium of 30% over its normal selling price of $4000.It has already accepted orders for 29,000 units at normal selling price.What is the total contribution to the company on sale of additional 9000 units if the variable cost per unit is $2000?

Accepted Answer

A) $36,000,000 
B) $28,800,000 
C) $18,000,000 
D) $10,800,000 
A) $36,000,000 
B) $28,800,000 
C) $18,000,000 
D) $10,800,000

Question 18

Block Island TV currently sells large televisions for $380.It has costs of $290.A competitor is bringing a new large television to market that will sell for $310.Management believes it must lower the price to $310 to compete in the market for large televisions.Marketing believes that the new price will cause sales to increase by 10%,even with a new competitor in the market.Block Island TV sales are currently 110,000 televisions per year.
What is the target cost per unit if target operating income is 35% of sales?

Accepted Answer

A) $108.50 
B) $133.00 
C) $201.50 
D) $247.00 
A) $108.50 
B) $133.00 
C) $201.50 
D) $247.00

Question 19

In setting prices for products and services,managers may attempt to charge what the customer is willing to pay however,too high a price may ________.

Accepted Answer

A) deter a customer from purchasing a product and seek alternatives 
B) increase demand and demand for the product 
C) indicate supply is too plentiful 
D) decrease a competitor's market share 
A) deter a customer from purchasing a product and seek alternatives 
B) increase demand and demand for the product 
C) indicate supply is too plentiful 
D) decrease a competitor's market share

Question 20

Sales of Granite City Products Inc.have been on a steady decline for the last 12 months.A market research study conducted revealed that the product of Granite City Products Inc.can be sold only for $420 as opposed to the current market price charged of $520 per unit.Granite City Products Inc.has decided to revise its sales price to $420.The annual sales target volume of the product after price revision is 280 units.Granite City Products Inc.wants to earn 30% on its sales amount.
What is the target operating income?

Accepted Answer

A) $82,320 
B) $35,280 
C) $117,600 
D) $152,880 
A) $82,320 
B) $35,280 
C) $117,600 
D) $152,880

Place the following steps for the implementation of target costing in order:

Jamal,Kareem,Rashid and Associates are in the process of evaluating its new client services for the business consulting division. What is the estimated life-cycle operating income for the first two years?

Knowledge Transfer Associates is in the process of evaluating its new client services for the business systems consulting division. What is the estimated life-cycle operating income for the first year?

Peak-load pricing is the practice of charging a lower price for the same product or service when the demand for it approaches the physical limit of the capacity to produce that product or service.

Three major influences on pricing decisions are ________.

Monopolists can charge prices without limitations as there is no competition for the product or service the monopolist provides.

Which of the following statements is true of the cost of producing a product?

When is a company said to be engaged in predatory pricing? What are the primary conditions to be satisfied to prove predatory pricing?

Which of the following scenarios is an example of predatory pricing?

There are alternative ways of measuring the cost base when applying a cost-plus method to pricing but research shows that many managers prefer to use full cost as the cost base.

In setting prices for products and services,managers may attempt to charge what the customer is willing to pay however,too high a price may ________.

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

Place the following steps for the implementation of target costing in order:

Jamal,Kareem,Rashid and Associates are in the process of evaluating its new client services for the business consulting division. What is the estimated life-cycle operating income for the first two years?

Knowledge Transfer Associates is in the process of evaluating its new client services for the business systems consulting division. What is the estimated life-cycle operating income for the first year?

Peak-load pricing is the practice of charging a lower price for the same product or service when the demand for it approaches the physical limit of the capacity to produce that product or service.

Three major influences on pricing decisions are ________.

Monopolists can charge prices without limitations as there is no competition for the product or service the monopolist provides.

Which of the following statements is true of the cost of producing a product?

When is a company said to be engaged in predatory pricing? What are the primary conditions to be satisfied to prove predatory pricing?

Which of the following scenarios is an example of predatory pricing?

There are alternative ways of measuring the cost base when applying a cost-plus method to pricing but research shows that many managers prefer to use full cost as the cost base.

In setting prices for products and services,managers may attempt to charge what the customer is willing to pay however,too high a price may ________.

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