Exam 13: Pricing Decisions and Cost Management

Jack's Back Porch manufactures rustic furniture.The cost accounting system estimates manufacturing costs to be $300 per table,consisting of 60% variable costs and 40% fixed costs.The company has surplus capacity available.It is Jack's Back Porch's policy to add a 70% markup to full costs. Jack's Back Porch is invited to bid on a one-time-only special order to supply 150 rustic tables.What is the lowest price Jack's Back Porch should bid on this special order?

Which of the following is an example of price discrimination?

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 $270.The annual target sales volume for interior doors is 29,000.Magnificent has target operating income of 40% of sales. What are target sales revenues?

A product costs $600 to manufacture and $20 to market and $10 to distribute (ship to customers. )R&D costs are allocated at $40 per unit.Based on a targeted rate of return,manager uses a mark-up of 30%.What is the prospective selling price based on a Cost-Plus pricing approach?

When making pricing decisions managers should include fixed cost per unit in the cost because ________.

Toy City Inc. ,manufactures a product and is considering raising the price by $40 a unit for the coming year.With a $40 price increase,demand is expected to fall by 2800 units. Bright Inc. ,has a capacity to produce 28,800 units.Due to an increase in the electricity costs,there is a sudden spike in demand by 2800 units.If the company adopts peak-load pricing policy and charges a premium of 20% over the current sales price,what is the total contribution on the sale of additional units?

Which of the following identifies an estimated price customers are willing to pay and then computes the cost to be achieved to earn the desired profit.

A company is said to be involved in predatory pricing even when it is compelled to sell its products are a price below the average variable cost because of pricing of the competitor.

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 $240.The annual target sales volume for interior doors is 21,000.Magnificent has target operating income of 20% of sales. What is the target cost?

In a noncompetitive environment,the key factor affecting pricing decisions is the ________.

Explain the differences between short-run pricing decisions and long-run pricing decisions.

In some industries,such as legal and consulting,most costs are locked in ________.

Crimpson Corp. ,a California-based company is selling its products for $21.Its average variable costs is $23 and the average selling price of its competitors is $26.This is an example of ________.

One purpose of cost allocations is to justify costs to establish a "fair" price,often required by law and government contracts.

Hitz Video Rental is evaluating rental prices.Historical data show that Friday and Saturday have twice the rentals of other days of the week.The following information pertains to the store's normal operations per week: The store manager wants to charge more for rentals on Friday and Saturday.What is the minimum price that should be charged during peak rental days?

Which of the following best defines the term: product life cycle?

Which of the following is a cost that,if eliminated,would reduce the actual or perceived value or utility (usefulness)customers experience from using the product or service?

Which of the following choices 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?

Selling prices computed under cost-plus pricing are prospective prices that may or may not actually be charged to customers.

Developing a product that satisfies the need of the potential customers is the first step in implementing target pricing and target costing.