Exam 18: Pricing and Profitability Analysis

Lorillard Corporation has the following information for April, May, and June 2014: There were no beginning inventories for April 2014, and all units were sold for $50. Costs are stable over the three months. What is the May ending inventory cost for Lorillard Corporation using the absorption costing method?

Sarandon Company has the following information pertaining to its two divisions for 2014: Common expenses are $12,000 for 2014. What is the operating income for Sarandon Company?

Answer the following: a. Discuss each of the following economic market structures(i.e., number of firms in inchistry, barriers to entry, uniqueness of product): 1. Perfectly competitive market 2. Monopolistic competition 3. Oligopoly 4. Monopoly b. Match the following industries with the appropriate economic market: Restaurants United StatesPost Office Cereal Wheat farmer Automotive

The following information pertains to Cumberland Corporation: What is the value of ending inventory using the absorption costing method?

The contribution margin variance is favorable if the budgeted contribution margin is less than the:

Division B earns a contribution margin of $200,000 and has a divisional margin of $70,000. If Division B is closed, all of the direct divisional expenses and $110,000 of common expenses can be eliminated. These facts indicate that closing the division will cause the firm's operating income to

The __________ variance is the difference between actual and budgeted contribution margin.

The profit history of a product according to four stages is called the product __________ .

Absorption costing is used to calculate two measures of profit: gross profit and operating income.

Figure 18-1 The Lancashire Corporation manufactures bottled water with an average manufacturing cost of $2 per case (a case contains 24 bottles). Bayview sold 1,000,000 cases last year to the following types of customers: The drugstore chains have special handling costs of $0.20 a case and increased administrative assistance costing $45,000 per year. The gas station chains require special marketing promotions that cost $50,000. Sales commissions of 10% are paid. The supermarket chains order electronically through EDI which costs $25,000 annually. Bayview is responsible for shipping costs, which totaled $0.50 a case and special labels costing $0.02 per bottle Local pharmacies have special handling costs of $0.10 per case and sales commissions are paid to agents costing $0.25 per case. Bad debt expense averages 10% of sales. Refer to Figure 18-1. What customer type has the least total cost per case ?

Consolidated Corporation had the following information: What is the markup based on materials?

The majority of the product cost is "locked in" during which of the following life-cycle stages?

Octagonal Company has the following information for 2014: There were no beginning inventories. What is the net income for Octagonal using the absorption costing method?

Scottish Company manufactures a variety of toys and games. John Chisholm, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in 2014 when 30,000 were projected. Sales for 2015 look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. What is the profit (loss) from Option One?

Scottish Company manufactures a variety of toys and games. John Chisholm, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in 2014 when 30,000 were projected. Sales for 2015 look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. What is the profit (loss) from Option Three?

Johanson Company had the following information: What is the markup based on cost of goods sold?

The following information about Morgantown Avionics' two Altimeter models is provided: Budgeted unit sales for the entire Motorcycle Choppers industry were 4,000 of all model types and actual unit sales for the industry were 4,600. Calculate: a. Market share variance (take percentages out to 4 significant digits) b. Market size variance

The charging of different prices to different customers for essentially the same product is called:

Deep Pit Mining mines three products. Gold ore sells for $1,000 per ton, variable costs are $600 per ton, and fixed mining costs are $250,000. The segment margin for 2014 was $(100,000). The management of Deep Pit Mining was considering dropping the mining of gold ore. Only one-half of the fixed expenses are direct and would be eliminated if the segment was dropped. What were the sales (in tons) for 2014?

Common segment costs, when contrasted with direct segment costs, are