Question 1

For long-run pricing decisions,using stable prices has the advantage of ________.

Accepted Answer

A) minimizing the need to monitor competitor's prices frequently 
B) reducing the need to change cost structures frequently 
C) reducing competition 
D) helping to build buyer-seller relationships 
A) minimizing the need to monitor competitor's prices frequently 
B) reducing the need to change cost structures frequently 
C) reducing competition 
D) helping to build buyer-seller relationships

Question 2

Value engineering entails improvements in product designs,and changes in materials specifications.

Accepted Answer

A) True 
 B)False

Question 3

Crimpson Company has invested $2,200,000 in a plant to make commercial juicer machines.The target operating income desired from the plant is $306,000 annually.The company plans annual sales of 7700 juicer machines at a selling price of $300 each.
What is the cost base of each juicer machine for Crimpson Company?

Accepted Answer

A) $260.26 
B) $39.74 
C) $300.00 
D) $285.71 
A) $260.26 
B) $39.74 
C) $300.00 
D) $285.71

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 both years combined?

Accepted Answer

A) $944,000 
B) $1,618,000 
C) ($674,000) 
D) $1,348,000 
A) $944,000 
B) $1,618,000 
C) ($674,000) 
D) $1,348,000

Question 5

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

Accepted Answer

A) $339,600 
B) $149,200 
C) $159,600 
D) $319,200 
A) $339,600 
B) $149,200 
C) $159,600 
D) $319,200

Question 6

Zolas' Heaters is approached by Ms.Leila,a new customer,to fulfill a large one-time-only special order for a product similar to one offered to regular customers.Zolas' Heaters has excess capacity.The following per unit data apply for sales to regular customers:
$\begin{array}{ll}
\text { Direct materials } & \$ 450.00 \
\text { Direct manufacturing labor } & 160.00 \
\text { Variable manufacturing support } & 100.00 \
\text { Fixed manufacturing support } & \underline{210.00} \
\quad \text { Total manufacturing costs } & 920.00 \
\text { Markup (25\% of total manufacturing costs) } & \underline{230.00} \
\text { Estimated selling price } & \$ 1150.00 \
\end{array}$
For Zolas' Heaters,what is the minimum acceptable price of this one-time-only special order?

Accepted Answer

A) $710.00 
B) $920.00 
C) $610.00 
D) $1150.00 
A) $710.00 
B) $920.00 
C) $610.00 
D) $1150.00

Question 7

Life-cycle budgeting estimates the costs and revenues attributed to a product from its initial R&D through production of a prototype product.

Accepted Answer

A) True 
 B)False

Question 8

Ski Valet provides materials that let people teach themselves how to snow ski.It has six different skill-level programs.Each one includes visual and audio learning aids along with a workbook that can be submitted to the company for grading and evaluation purposes,if the person so desires.
The accounting system of Ski Valet is very traditional in its reporting functions with the calendar year being the company's fiscal year.It includes an abundance of information that can be used for various reporting purposes.
The company has found that any new idea soon runs its course with an effective life of about three years.Therefore,the company is always in the development stage of some new program.Program development requires experts in the area to provide the know-how of the item being developed and a development team that puts together the video,audio,and workbook materials.The actual costs of reproducing the packages are relatively inexpensive when compared to the development costs.
Required:
How might product life-cycle budgeting aid the company in improving its overall operations?

Accepted Answer

Because the product life cycle for Ski V

Question 9

Which of the following is true of locked-in costs?

Accepted Answer

A) Locked-in costs are the same as sunk costs. 
B) Locked-in costs are always fixed costs. 
C) Locked-in costs are incurred costs. 
D) Locked-in costs are also called designed-in costs. 
A) Locked-in costs are the same as sunk costs. 
B) Locked-in costs are always fixed costs. 
C) Locked-in costs are incurred costs. 
D) Locked-in costs are also called designed-in costs.

Question 10

A full-cost formula for pricing does requires that the management accountant performs a detailed analysis of cost-behavior patterns to separate product costs into variable and fixed components.

Accepted Answer

A) True 
 B)False

Question 11

Faraway Corporation is located in Providence,RI and manufactures a product that costs $100 and charges McLeod Company,a Massachusetts based retailer,$300 but charges a customer located in China $310 as it costs more to ship the product oversees.This is an example of illegal price discrimination under the U.S.Robinson-Patman Act of 1936.

Accepted Answer

A) True 
 B)False

Question 12

Target cost per unit is arrived at by adding the target operating income to the target price of the product.

Accepted Answer

A) True 
 B)False

Question 13

Bouchard Company manufactures a product that currently has a full cost of $700.Its target operating income per unit is $80 and management's budgets assume that same target operating income per unit for the foreseeable future.To stay competitive,Bouchard management believes it must cut its price by 25%.What will be its new target cost?

Accepted Answer

A) $700 
B) $505.00 
C) $585.00 
D) $80 
A) $700 
B) $505.00 
C) $585.00 
D) $80

Question 14

Value engineering can have undesirable effects if the product remains in development for a long time as the reengineering team repeatedly evaluates alternative designs.

Accepted Answer

A) True 
 B)False

Question 15

Grace Greeting Cards Incorporated is starting a new business venture and are in the process of evaluating its product lines.Information for one new product,traditional parchment grade cards,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?
c.What is the estimated life-cycle operating income per year for the years after the first year?
d.What is the total estimated life-cycle operating income?

Accepted Answer

a.Estimated life-cycle revenues:
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Question 16

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 $500 as opposed to the current market price charged of $600 per unit.Granite City Products Inc.has decided to revise its sales price to $500.The annual sales target volume of the product after price revision is 200 units.Granite City Products Inc.wants to earn 40% on its sales amount.
What is the total target cost?

Accepted Answer

A) $140,000 
B) $60,000 
C) $100,000 
D) $40,000 
A) $140,000 
B) $60,000 
C) $100,000 
D) $40,000

Question 17

Which of the following statements is true of costs and pricing decisions?

Accepted Answer

A) Companies get profit from selling products only when they are the price makers. 
B) Companies supply products as long as the price the customer is willing to pay for its products exceeds the price that is charged by the competitor. 
C) Companies supply products as long as there is a demand for the product in the market regardless of the price at which the products are sold. 
D) Companies supply products as long as the revenues from selling the additional units exceed the cost of producing them. 
A) Companies get profit from selling products only when they are the price makers. 
B) Companies supply products as long as the price the customer is willing to pay for its products exceeds the price that is charged by the competitor. 
C) Companies supply products as long as there is a demand for the product in the market regardless of the price at which the products are sold. 
D) Companies supply products as long as the revenues from selling the additional units exceed the cost of producing them.

Question 18

A re-design of a product so that it requires fewer components to decrease ordering,receiving,testing,and inspection costs is an example of value-engineering.

Accepted Answer

A) True 
 B)False

Question 19

Wilde Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
$\begin{array}{ll}
\text { Direct materials } & \$ 1,150,000 \
\text { Direct labor } & 775,000 \
\text { Manufacturing overhead } & \
\quad \text { Variable } & 850,000 \
\quad \text { Fixed } & 670,000 \
\text { Selling and administrative } & \
\quad \text { Variable } & 410,000 \
\quad \text { Fixed } & \underline{490,000} \
\text { Total costs } & \underline{\$ 4,345,000} \
\end{array}$
Wilde has an annual target operating income of $920,000.
The markup percentage for setting prices as a percentage of variable manufacturing costs is ________.

Accepted Answer

A) 52.83% 
B) 89.73% 
C) 65.31% 
D) 21.17% 
A) 52.83% 
B) 89.73% 
C) 65.31% 
D) 21.17%

Question 20

Short-run prices should at least recover ________.

Accepted Answer

A) full cost of producing a product 
B) fixed manufacturing overhead 
C) variable cost of producing a product 
D) variable and fixed manufacturing overhead 
A) full cost of producing a product 
B) fixed manufacturing overhead 
C) variable cost of producing a product 
D) variable and fixed manufacturing overhead

For long-run pricing decisions,using stable prices has the advantage of ________.

Value engineering entails improvements in product designs,and changes in materials specifications.

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 both years combined?

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

Life-cycle budgeting estimates the costs and revenues attributed to a product from its initial R&D through production of a prototype product.

Which of the following is true of locked-in costs?

A full-cost formula for pricing does requires that the management accountant performs a detailed analysis of cost-behavior patterns to separate product costs into variable and fixed components.

Target cost per unit is arrived at by adding the target operating income to the target price of the product.

Value engineering can have undesirable effects if the product remains in development for a long time as the reengineering team repeatedly evaluates alternative designs.

Which of the following statements is true of costs and pricing decisions?

A re-design of a product so that it requires fewer components to decrease ordering,receiving,testing,and inspection costs is an example of value-engineering.

Short-run prices should at least recover ________.

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

For long-run pricing decisions,using stable prices has the advantage of ________.

Value engineering entails improvements in product designs,and changes in materials specifications.

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 both years combined?

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

Life-cycle budgeting estimates the costs and revenues attributed to a product from its initial R&D through production of a prototype product.

Which of the following is true of locked-in costs?

A full-cost formula for pricing does requires that the management accountant performs a detailed analysis of cost-behavior patterns to separate product costs into variable and fixed components.

Target cost per unit is arrived at by adding the target operating income to the target price of the product.

Value engineering can have undesirable effects if the product remains in development for a long time as the reengineering team repeatedly evaluates alternative designs.

Which of the following statements is true of costs and pricing decisions?

A re-design of a product so that it requires fewer components to decrease ordering,receiving,testing,and inspection costs is an example of value-engineering.

Short-run prices should at least recover ________.

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