Question 1

The target rate of return on investment the percentage used to markup the cost to an acceptable selling price.

Accepted Answer

A) True 
 B)False

Question 2

Marcon Tech Corp. ,currently sells radios for $7,000.It has costs of $5,400.A competitor is bringing a new radio to market that will sell for $6,850.Management believes it must lower the price to $6,850 to compete in the market for radios.The marketing department believes that the new price will cause sales to increase by 10%,even with a new competitor in the market.Marcon's sales are currently 1,000 radios per year.
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 in its estimation?

Accepted Answer

a.
Target cost = $6,850 - ($6,

Question 3

Rework is an example of a value-added cost.

Accepted Answer

A) True 
 B)False

Question 4

An understanding of life-cycle costs can lead to which of the following?

Accepted Answer

A) additional costs during the manufacturing cycle 
B) less need for evaluation of the competition 
C) the accumulation of information for strategically evaluating pricing decisions 
D) mutually beneficial relationships between buyers and sellers 
A) additional costs during the manufacturing cycle 
B) less need for evaluation of the competition 
C) the accumulation of information for strategically evaluating pricing decisions 
D) mutually beneficial relationships between buyers and sellers

Question 5

To comply with antitrust laws,a company must not engage in predatory pricing,dumping,or collusive pricing which lessen competition,put another company at a competitive disadvantage,or harm consumers.

Accepted Answer

A) True 
 B)False

Question 6

Supervision costs can have both value-added and non-value-added components.

Accepted Answer

A) True 
 B)False

Question 7

The amount of a markup percentage that customers are willing to pay is usually higher when which of the following conditions exist?

Accepted Answer

A) there is idle capacity 
B) demand is strong 
C) competition is intense 
D) demand is elastic 
A) there is idle capacity 
B) demand is strong 
C) competition is intense 
D) demand is elastic

Question 8

For a company operating in a perfectly competitive market,cost information affects the pricing decisions of the company.

Accepted Answer

A) True 
 B)False

Question 9

Managers need to understand customers because ________.

Accepted Answer

A) they are the key in influencing the board decisions and help in formulating policies with the suppliers 
B) they guide the managers to formulate pricing policies 
C) they are more knowledgeable as they easy access to price and other information online 
D) they influence the costing decisions of the product 
A) they are the key in influencing the board decisions and help in formulating policies with the suppliers 
B) they guide the managers to formulate pricing policies 
C) they are more knowledgeable as they easy access to price and other information online 
D) they influence the costing decisions of the product

Question 10

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:
$$\begin{array} { l l } 
\text { Direct materials } & \$ 1900.00 \
\text { Direct manufacturing labor } & 120.00 \
\text { Variable manufacturing support } & 210.00 \
\text { Fixed manufacturing support } & \underline { 170.00 } \
\quad \text { Total manufacturing costs } & 2400.00 \
\text { Markup (25\% of total manufacturing costs) } & \underline { 600.00 } \
\text { Estimated selling price } & \$ 3000.00
\end{array}$$
If Golden Generator Supply accepts the order at $2640,what is the amount contributed towards fixed costs and profit on a sales order of 1600 units?

Accepted Answer

A) $384,000 
B) $656,000 
C) $1,232,000 
D) $992,000 
A) $384,000 
B) $656,000 
C) $1,232,000 
D) $992,000

Question 11

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:
 
If Mr.Stephen wanted a long-term commitment,and not a one-time-only special order,for supplying this product,calculate the most likely price to be quoted assuming the markup remains the same?

Accepted Answer

A) $650 
B) $790 
C) $869 
D) $370 
A) $650 
B) $790 
C) $869 
D) $370

Question 12

At what point are direct material costs per unit "locked in"?

Accepted Answer

A) designed 
B) assembled 
C) sold 
D) delivered 
A) designed 
B) assembled 
C) sold 
D) delivered

Question 13

The value customers place on a product and the prices charged for competing products affect demand and the cost of producing and delivering the product affect supply.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is an example of value added cost?

Accepted Answer

A) cost of machine breakdown 
B) cost of defective products 
C) rework costs 
D) direct machining costs 
A) cost of machine breakdown 
B) cost of defective products 
C) rework costs 
D) direct machining costs

Question 15

Managing environmental costs is an example of life-cycle costing and value engineering.

Accepted Answer

A) True 
 B)False

Question 16

The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced at a low enough cost to provide adequate operating income is referred to as ________.

Accepted Answer

A) cost-plus pricing 
B) target costing 
C) kaizen costing 
D) full costing 
A) cost-plus pricing 
B) target costing 
C) kaizen costing 
D) full costing

Question 17

Ocean Grove Vending Company has invested $1,450,000 in a plant to make vending machines.The target operating income desired from the plant is $362,500 annually.The company plans annual sales of 1500 vending machines at a selling price of $1000 each.
What is the markup percentage as a percentage of cost for Ocean Grove Vending Company?

Accepted Answer

A) 24.17% 
B) 31.87% 
C) 75.83% 
D) 25.00% 
A) 24.17% 
B) 31.87% 
C) 75.83% 
D) 25.00%

Question 18

Companies operating in competitive markets should ideally use cost-plus approach to pricing.

Accepted Answer

A) True 
 B)False

Question 19

A company operating in a perfectly competitive market has more leeway to set higher prices than a firm that is a monopolist.

Accepted Answer

A) True 
 B)False

Question 20

Two different approaches to pricing decisions are market based and cost-plus.

Accepted Answer

A) True 
 B)False

The target rate of return on investment the percentage used to markup the cost to an acceptable selling price.

Rework is an example of a value-added cost.

An understanding of life-cycle costs can lead to which of the following?

To comply with antitrust laws,a company must not engage in predatory pricing,dumping,or collusive pricing which lessen competition,put another company at a competitive disadvantage,or harm consumers.

Supervision costs can have both value-added and non-value-added components.

The amount of a markup percentage that customers are willing to pay is usually higher when which of the following conditions exist?

For a company operating in a perfectly competitive market,cost information affects the pricing decisions of the company.

Managers need to understand customers because ________.

At what point are direct material costs per unit "locked in"?

The value customers place on a product and the prices charged for competing products affect demand and the cost of producing and delivering the product affect supply.

Which of the following is an example of value added cost?

Managing environmental costs is an example of life-cycle costing and value engineering.

The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced at a low enough cost to provide adequate operating income is referred to as ________.

Companies operating in competitive markets should ideally use cost-plus approach to pricing.

A company operating in a perfectly competitive market has more leeway to set higher prices than a firm that is a monopolist.

Two different approaches to pricing decisions are market based and cost-plus.

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

The target rate of return on investment the percentage used to markup the cost to an acceptable selling price.

Rework is an example of a value-added cost.

An understanding of life-cycle costs can lead to which of the following?

To comply with antitrust laws,a company must not engage in predatory pricing,dumping,or collusive pricing which lessen competition,put another company at a competitive disadvantage,or harm consumers.

Supervision costs can have both value-added and non-value-added components.

The amount of a markup percentage that customers are willing to pay is usually higher when which of the following conditions exist?

For a company operating in a perfectly competitive market,cost information affects the pricing decisions of the company.

Managers need to understand customers because ________.

At what point are direct material costs per unit "locked in"?

The value customers place on a product and the prices charged for competing products affect demand and the cost of producing and delivering the product affect supply.

Which of the following is an example of value added cost?

Managing environmental costs is an example of life-cycle costing and value engineering.

The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced at a low enough cost to provide adequate operating income is referred to as ________.

Companies operating in competitive markets should ideally use cost-plus approach to pricing.

A company operating in a perfectly competitive market has more leeway to set higher prices than a firm that is a monopolist.

Two different approaches to pricing decisions are market based and cost-plus.

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