Question 1

Which of the following are true regarding long-run pricing decisions?

Accepted Answer

A) they result in maximizing return on investment 
B) they include adjusting product mix in a competitive environment 
C) the price needs to be sufficient enough to break-even 
D) use prices that include a reasonable return on invested capital 
A) they result in maximizing return on investment 
B) they include adjusting product mix in a competitive environment 
C) the price needs to be sufficient enough to break-even 
D) use prices that include a reasonable return on invested capital

Question 2

A graph comparing locked-in costs with incurred costs will have ________.

Accepted Answer

A) locked-in costs rising much faster initially,but dropping to zero after the product is manufactured 
B) the two cost lines running parallel until the end of the process,when they join 
C) locked-in costs rising much faster initially than the incurred cost,but joining the incurred cost line at the completion of the value-chain functions 
D) no differences unless the product is manufactured inefficiently 
A) locked-in costs rising much faster initially,but dropping to zero after the product is manufactured 
B) the two cost lines running parallel until the end of the process,when they join 
C) locked-in costs rising much faster initially than the incurred cost,but joining the incurred cost line at the completion of the value-chain functions 
D) no differences unless the product is manufactured inefficiently

Question 3

Jamal,Kareem,Rashid and Associates are in the process of evaluating its new client services for the business consulting division.
 
What are estimated life-cycle revenues?

Accepted Answer

A) $2,484,000 
B) $208,120 
C) $4,968,000 
D) $416,240 
A) $2,484,000 
B) $208,120 
C) $4,968,000 
D) $416,240

Question 4

Crimpson Company has invested $2,100,000 in a plant to make commercial juicer machines.The target operating income desired from the plant is $305,000 annually.The company plans annual sales of 7400 juicer machines at a selling price of $600 each.
What is the target rate of return on investment for Crimpson Company?

Accepted Answer

A) 6)9% 
B) 7)4% 
C) 14.5% 
D) 12.5% 
A) 6)9% 
B) 7)4% 
C) 14.5% 
D) 12.5%

Question 5

In cost-plus pricing,the markup definitively determines the actual selling price.

Accepted Answer

A) True 
 B)False

Question 6

If U.S dollar strengthens against the Japanese Yen,Japanese producers selling goods in U.S markets will have to increase the prices of products to recover the extra cost arising from currency fluctuation.

Accepted Answer

A) True 
 B)False

Question 7

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 $480 as opposed to the current market price charged of $580 per unit.Granite City Products Inc.has decided to revise its sales price to $480.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 cost per unit?

Accepted Answer

A) $625.00 
B) $336.00 
C) $480.00 
D) $145.00 
A) $625.00 
B) $336.00 
C) $480.00 
D) $145.00

Question 8

Price discrimination is the practice of charging a higher price for the same product or service when demand approaches the physical limit of the capacity to produce that product or service.

Accepted Answer

A) True 
 B)False

Question 9

As a general rule of economics,companies should only produce and sell units as long as ________.

Accepted Answer

A) there is customer demand for the product 
B) there is a relatively small supply of the product when compared to past operating periods 
C) the revenue from an additional unit exceeds the cost of producing it 
D) there is a generous supply of low-cost direct materials 
A) there is customer demand for the product 
B) there is a relatively small supply of the product when compared to past operating periods 
C) the revenue from an additional unit exceeds the cost of producing it 
D) there is a generous supply of low-cost direct materials

Question 10

Samuels Company is considering pricing its 10,000-gallon petroleum tanks using either variable manufacturing or full product costs as the base.The variable cost base provides a prospective price of $6,000 and the full cost base provides a prospective price of $6,100.Which of the following explains the difference in the two prices?

Accepted Answer

A) the estimated amount of profit 
B) the variable cost base estimates fixed costs in the markup percentage while the full cost base includes an amount for fixed costs 
C) there is no explanation since this is known as price discrimination 
D) the difference is caused by the inability to estimate fixed cost per unit with any degree of reliability 
A) the estimated amount of profit 
B) the variable cost base estimates fixed costs in the markup percentage while the full cost base includes an amount for fixed costs 
C) there is no explanation since this is known as price discrimination 
D) the difference is caused by the inability to estimate fixed cost per unit with any degree of reliability

Question 11

Gracius Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers.Gracius Manufacturing has a policy of adding a 20% markup to full costs and currently has excess capacity.The following per unit data apply for sales to regular customers:
 
What is the full cost of the product per unit for Gracius Manufacturing?

Accepted Answer

A) $90 
B) $140 
C) $360 
D) $432 
A) $90 
B) $140 
C) $360 
D) $432

Question 12

When the price of a product does not change as a result of changes in demand,the price insensitivity to demand is called demand inelasticity.

Accepted Answer

A) True 
 B)False

Question 13

When demand for a product is very elastic and prices are increased,demand will ________.

Accepted Answer

A) remain the same,and operating profits will increase 
B) remain the same,and operating profits may either increase or decrease 
C) decrease,and operating profits will decrease 
D) decrease,and operating profits may either increase or decrease 
A) remain the same,and operating profits will increase 
B) remain the same,and operating profits may either increase or decrease 
C) decrease,and operating profits will decrease 
D) decrease,and operating profits may either increase or decrease

Question 14

An Indian company selling a product in the United States at a price below the market value of the product in India is an example of collusive pricing.

Accepted Answer

A) True 
 B)False

Question 15

Customer life-cycle costs focus on the total costs incurred by a customer to acquire,use,maintain,and dispose of a product or service.

Accepted Answer

A) True 
 B)False

Question 16

Wilde Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
$\begin{array}{cc}
\text { Direct materials } & \$ 1,135,000 \
\text { Direct labor } & 800,000 \
\text { Manufacturing overhead } & \
\text { Variable } & 880,000 \
\text { Fixed } & 650,000 \
\text { Selling and administrative } & \
\quad \text { Variable } & 380,000 \
\text { Fixed } & \underline{510,000} \
\text { Total costs } & \underline{\$ 4,355,000}
\end{array}$
Wilde has an annual target operating income of $990,000.
The markup percentage for setting prices as a percentage of the full cost of the product is ________.

Accepted Answer

A) 31.9% 
B) 36.3% 
C) 45.8% 
D) 22.7% 
A) 31.9% 
B) 36.3% 
C) 45.8% 
D) 22.7%

Question 17

A life-cycle budget is usually prepared to budget for costs and production for a period of one year.

Accepted Answer

A) True 
 B)False

Question 18

Which one of the following activities would most likely be considered a long-run pricing decision?

Accepted Answer

A) one-time-only special order pricing that would result in achieving the break-even point 
B) product mix adjustments in a competitive market 
C) setting prices to generate a reasonable rate of return on investment 
D) changing prices in response to weak demand 
A) one-time-only special order pricing that would result in achieving the break-even point 
B) product mix adjustments in a competitive market 
C) setting prices to generate a reasonable rate of return on investment 
D) changing prices in response to weak demand

Question 19

Real Wood Structures Company has invested $1,040,000 in a plant to build small tool sheds.The target operating income desired from the plant is $156,000 annually.The company plans annual sales of 1200 sheds at a selling price of $1100 each.
What is the target rate of return on investment for Real Wood Structures Company?

Accepted Answer

A) 18.0% 
B) 15.0% 
C) 11.8% 
D) 85.0% 
A) 18.0% 
B) 15.0% 
C) 11.8% 
D) 85.0%

Question 20

Which of the following statements is true regarding cost-plus pricing?

Accepted Answer

A) It starts with a target price which is the estimated price for a product. 
B) A company uses a markup percentage that estimates a product price that covers full product costs and earns the required return on investment. 
C) It first determines product characteristics and target price on the basis of customer preferences and then computes a target cost. 
D) The cost-plus price chosen has already been studied for customer reaction to the price. 
A) It starts with a target price which is the estimated price for a product. 
B) A company uses a markup percentage that estimates a product price that covers full product costs and earns the required return on investment. 
C) It first determines product characteristics and target price on the basis of customer preferences and then computes a target cost. 
D) The cost-plus price chosen has already been studied for customer reaction to the price.

Which of the following are true regarding long-run pricing decisions?

A graph comparing locked-in costs with incurred costs will have ________.

Jamal,Kareem,Rashid and Associates are in the process of evaluating its new client services for the business consulting division. What are estimated life-cycle revenues?

In cost-plus pricing,the markup definitively determines the actual selling price.

If U.S dollar strengthens against the Japanese Yen,Japanese producers selling goods in U.S markets will have to increase the prices of products to recover the extra cost arising from currency fluctuation.

Price discrimination is the practice of charging a higher price for the same product or service when demand approaches the physical limit of the capacity to produce that product or service.

As a general rule of economics,companies should only produce and sell units as long as ________.

When the price of a product does not change as a result of changes in demand,the price insensitivity to demand is called demand inelasticity.

When demand for a product is very elastic and prices are increased,demand will ________.

An Indian company selling a product in the United States at a price below the market value of the product in India is an example of collusive pricing.

Customer life-cycle costs focus on the total costs incurred by a customer to acquire,use,maintain,and dispose of a product or service.

A life-cycle budget is usually prepared to budget for costs and production for a period of one year.

Which one of the following activities would most likely be considered a long-run pricing decision?

Which of the following statements is true regarding cost-plus pricing?

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

Which of the following are true regarding long-run pricing decisions?

A graph comparing locked-in costs with incurred costs will have ________.

Jamal,Kareem,Rashid and Associates are in the process of evaluating its new client services for the business consulting division. What are estimated life-cycle revenues?

In cost-plus pricing,the markup definitively determines the actual selling price.

If U.S dollar strengthens against the Japanese Yen,Japanese producers selling goods in U.S markets will have to increase the prices of products to recover the extra cost arising from currency fluctuation.

Price discrimination is the practice of charging a higher price for the same product or service when demand approaches the physical limit of the capacity to produce that product or service.

As a general rule of economics,companies should only produce and sell units as long as ________.

When the price of a product does not change as a result of changes in demand,the price insensitivity to demand is called demand inelasticity.

When demand for a product is very elastic and prices are increased,demand will ________.

An Indian company selling a product in the United States at a price below the market value of the product in India is an example of collusive pricing.

Customer life-cycle costs focus on the total costs incurred by a customer to acquire,use,maintain,and dispose of a product or service.

A life-cycle budget is usually prepared to budget for costs and production for a period of one year.

Which one of the following activities would most likely be considered a long-run pricing decision?

Which of the following statements is true regarding cost-plus pricing?

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