Question 1

Salt is an example of a product whose demand is price inelastic.

Accepted Answer

A) True 
 B)False

Question 2

Edelheit Company uses the absorption costing approach to cost-plus pricing as described in the text to set prices for its products. Based on budgeted sales of 26,000 units next year, the unit product cost of a particular product is $24.20. The company's selling and administrative expenses for this product are budgeted to be $629,000 in total for the year. The company has invested $340,000 in this product and expects a return on investment of 14%.
-The selling price based on the absorption costing approach for this product would be closest to:

Accepted Answer

A) $27.59 
B) $50.22 
C) $48.40 
D) $100.46 
A) $27.59 
B) $50.22 
C) $48.40 
D) $100.46

Question 3

Werry Company is about to introduce a new product. It is expected that the following costs would be incurred when 25,000 units are produced and sold in a year:   Werry Company uses the absorption costing approach to cost-plus pricing as described in the text.
-After introducing the product at a markup of 90%,the company finds that it has excess capacity.A foreign dealer has offered to purchase 4,000 units of the product at a special price of $32 per unit.This sale would not disturb regular business.If the special price is accepted on the 4,000 units,the effect on total profits for the year will be a:

Accepted Answer

A) 56,000 increase 
B) 76,800 increase 
C) 16,000 increase 
D) 48,000 increase 
A) 56,000 increase 
B) 76,800 increase 
C) 16,000 increase 
D) 48,000 increase

Question 4

Which of the following methods would probably be the most beneficial to a company that has little or no control over the price that it can charge for its product or service?

Accepted Answer

A) Cost-plus pricing,absorption approach 
B) Cost-plus pricing,contribution approach 
C) Time and material pricing 
D) Target costing 
A) Cost-plus pricing,absorption approach 
B) Cost-plus pricing,contribution approach 
C) Time and material pricing 
D) Target costing

Question 5

Nicklos Corporation's marketing manager believes that every 7% decrease in the selling price of one of the company's products would lead to a 10% increase in the product's total unit sales.The product's absorption costing unit product cost is $18.60.The variable production cost is $7.60 per unit and the variable selling and administrative cost is $4.90.
Required:
a.Compute the product's price elasticity of demand as defined in the text.
b.Compute the product's profit-maximizing price according to the formula in the text.

Accepted Answer

a.Price elasticity of demand
= ln(1 + %c

Question 6

Coan Company recently changed the selling price of one of its products. Data concerning sales for comparable periods before and after the price change are presented below.   The product's variable cost is $21.40 per unit.
-The product's price elasticity of demand as defined in the text is closest to:

Accepted Answer

A) -3.46 
B) -3.67 
C) -2.92 
D) -1.44 
A) -3.46 
B) -3.67 
C) -2.92 
D) -1.44

Question 7

Rizer Corporation manufactures a product that has the following costs:  
 The company uses the absorption costing approach to  cost-plus pricing as described in the text.The pricing calculations are based on budgeted production and sales of 40,000 units per year.
The company has invested $200,000 in this product and expects a return on investment of 15%.
Required:
a.Compute the markup on absorption cost.
b.Compute the selling price of the product using the absorption costing approach.

Accepted Answer

a. @#IMG-DLM& 
Markup percentage on absorption cos

Question 8

Holding all other things constant,if the price elasticity of demand increases (i.e. ,becomes more negative),then the markup under absorption costing will:

Accepted Answer

A) increase. 
B) decrease. 
C) remain the same. 
D) The effect cannot be determined. 
A) increase. 
B) decrease. 
C) remain the same. 
D) The effect cannot be determined.

Question 9

Kirsch,Inc. ,manufactures a product with the following costs:   The company uses the absorption costing approach to cost-plus pricing described in the text.The pricing calculations are based on budgeted production and sales of 41,000 units per year. The company has invested $540,000 in this product and expects a return on investment of 13%.
The selling price based on the absorption costing approach would be closest to:

Accepted Answer

A) $95.43 
B) $72.31 
C) $41.50 
D) $70.60 
A) $95.43 
B) $72.31 
C) $41.50 
D) $70.60

Question 10

The management of Nerby Corporation is considering introducing a new product--a compact lawn blower. At a selling price of $28 per unit, management projects sales of 40,000 units. The lawn blower would require an investment of $900,000. The desired return on investment is 20%.
-The target cost per lawn blower is closest to:

Accepted Answer

A) $28.20 
B) $23.50 
C) $33.60 
D) $28.00 
A) $28.20 
B) $23.50 
C) $33.60 
D) $28.00

Question 11

Blumstein Corporation would like to use target costing for a new product it is considering introducing. At a selling price of $22 per unit, management projects sales of 60,000 units. The new product would require an investment of $300,000. The desired return on investment is 11%.
-The target cost per unit is closest to:

Accepted Answer

A) $22.00 
B) $23.81 
C) $21.45 
D) $24.42 
A) $22.00 
B) $23.81 
C) $21.45 
D) $24.42

Question 12

Blumstein Corporation would like to use target costing for a new product it is considering introducing. At a selling price of $22 per unit, management projects sales of 60,000 units. The new product would require an investment of $300,000. The desired return on investment is 11%.
-The desired profit according to the target costing calculations is:

Accepted Answer

A) $33,000 
B) $145,200 
C) $1,287,000 
D) $1,320,000 
A) $33,000 
B) $145,200 
C) $1,287,000 
D) $1,320,000

Question 13

Edelheit Company uses the absorption costing approach to cost-plus pricing as described in the text to set prices for its products. Based on budgeted sales of 26,000 units next year, the unit product cost of a particular product is $24.20. The company's selling and administrative expenses for this product are budgeted to be $629,000 in total for the year. The company has invested $340,000 in this product and expects a return on investment of 14%.
-The markup on absorption cost for this product would be closest to:

Accepted Answer

A) 100.0% 
B) 14.0% 
C) 114.0% 
D) 107.5% 
A) 100.0% 
B) 14.0% 
C) 114.0% 
D) 107.5%

Question 14

The absorption costing approach to cost-plus pricing provides assurance that the company's required rate of return will be realized even if unit sales are less than forecasted.

Accepted Answer

A) True 
 B)False

Question 15

Werry Company is about to introduce a new product. It is expected that the following costs would be incurred when 25,000 units are produced and sold in a year:   Werry Company uses the absorption costing approach to cost-plus pricing as described in the text.
-Assume that Werry Company has not yet determined a markup to use on the new product.The new product would require an investment of $800,000.The company requires a 20% rate of return on investment on all new products.The markup under the absorption costing approach would be closest to:

Accepted Answer

A) 62.0% 
B) 80.0% 
C) 35.0% 
D) 24.6% 
A) 62.0% 
B) 80.0% 
C) 35.0% 
D) 24.6%

Question 16

Epperson Company's management believes that every 3% decrease in the selling price of one of the company's products leads to an 8% increase in the product's total unit sales.The product's price elasticity of demand as defined in the text is closest to:

Accepted Answer

A) -2.82 
B) -2.98 
C) -2.53 
D) -2.03 
A) -2.82 
B) -2.98 
C) -2.53 
D) -2.03

Question 17

Finnie Company's management believes that every 5% increase in the selling price of one of the company's products results in a 13% decrease in the product's total unit sales.The variable production cost of this product is $23.10 per unit and the variable selling and administrative cost is $5.40 per unit. The product's profit-maximizing price according to the formula in the text is closest to:

Accepted Answer

A) $32.03 
B) $47.48 
C) $43.87 
D) $33.63 
A) $32.03 
B) $47.48 
C) $43.87 
D) $33.63

Question 18

Boden Company's management believes that every 2% increase in the selling price of one of the company's products would lead to a 5% decrease in the product's total unit sales. The product's variable cost is $19.30 per unit.
-The product's profit-maximizing price according to the formula in the text is closest to:

Accepted Answer

A) $37.39 
B) $31.44 
C) $40.88 
D) $28.91 
A) $37.39 
B) $31.44 
C) $40.88 
D) $28.91

Question 19

Holding all other things constant,an increase in the company's required ROI will affect:

Accepted Answer

A) the markup under the absorption costing approach to cost-plus pricing. 
B) the markup used to compute the profit-maximizing price. 
C) both the markup under the absorption costing approach to cost-plus pricing and the markup used to compute profit-maximizing price. 
D) neither the markup under the absorption costing approach to cost-plus pricing nor the markup used to compute profit-maximizing price. 
A) the markup under the absorption costing approach to cost-plus pricing. 
B) the markup used to compute the profit-maximizing price. 
C) both the markup under the absorption costing approach to cost-plus pricing and the markup used to compute profit-maximizing price. 
D) neither the markup under the absorption costing approach to cost-plus pricing nor the markup used to compute profit-maximizing price.

Question 20

Jaber Corporation makes a product with the following costs:   The company uses the absorption costing approach to cost-plus pricing described in the text.The pricing calculations are based on budgeted production and sales of 52,000 units per year. The company has invested $200,000 in this product and expects a return on investment of 9%.
The markup on absorption cost would be closest to:

Accepted Answer

A) 37.7% 
B) 9.0% 
C) 110.8% 
D) 37.1% 
A) 37.7% 
B) 9.0% 
C) 110.8% 
D) 37.1%

Salt is an example of a product whose demand is price inelastic.

Which of the following methods would probably be the most beneficial to a company that has little or no control over the price that it can charge for its product or service?

Coan Company recently changed the selling price of one of its products. Data concerning sales for comparable periods before and after the price change are presented below. The product's variable cost is $21.40 per unit. -The product's price elasticity of demand as defined in the text is closest to:

Holding all other things constant,if the price elasticity of demand increases (i.e. ,becomes more negative),then the markup under absorption costing will:

The absorption costing approach to cost-plus pricing provides assurance that the company's required rate of return will be realized even if unit sales are less than forecasted.

Epperson Company's management believes that every 3% decrease in the selling price of one of the company's products leads to an 8% increase in the product's total unit sales.The product's price elasticity of demand as defined in the text is closest to:

Holding all other things constant,an increase in the company's required ROI will affect:

Managerial Accounting and Cost Concepts

Job-Order Costing

Process Costing

Cost-Volume-Profit Relationships

Variable Costing and Segment Reporting: Tools for Management

Activity-Based Costing: a Tool to Aid Decision Making

Profit Planning

Flexible Budgets and Performance Analysis

Standard Costs and Variances

Performance Measurement in Decentralized Organizations

Differential Analysis: The Key to Decision Making

Capital Budgeting Decisions

Statement of Cash Flows

Financial Statement Analysis

Least-Squares Regression Computations

Appendix B: Cost of Quality

The Predetermined Overhead Rate and Capacity

Further Classification of Labor Costs

Fifo Method

Service Department Allocations

Abc Action Analysis

Using a Modified Form of Activity-Based Costing to Determine Product Costs for External Reports

Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System

Journal Entries to Record Variances

Transfer Pricing

Service Department Charges

The Concept of Present Value

Income Taxes in Capital Budgeting Decisions

The Direct Method of Determining the Net Cash Provided by Operating Activities

Profitability Analysis

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Exam 30: Pricing Products and Services

Salt is an example of a product whose demand is price inelastic.

Which of the following methods would probably be the most beneficial to a company that has little or no control over the price that it can charge for its product or service?

Coan Company recently changed the selling price of one of its products. Data concerning sales for comparable periods before and after the price change are presented below. The product's variable cost is $21.40 per unit. -The product's price elasticity of demand as defined in the text is closest to:

Holding all other things constant,if the price elasticity of demand increases (i.e. ,becomes more negative),then the markup under absorption costing will:

The absorption costing approach to cost-plus pricing provides assurance that the company's required rate of return will be realized even if unit sales are less than forecasted.

Epperson Company's management believes that every 3% decrease in the selling price of one of the company's products leads to an 8% increase in the product's total unit sales.The product's price elasticity of demand as defined in the text is closest to:

Holding all other things constant,an increase in the company's required ROI will affect:

Managerial Accounting and Cost Concepts

Job-Order Costing

Process Costing

Cost-Volume-Profit Relationships

Variable Costing and Segment Reporting: Tools for Management

Activity-Based Costing: a Tool to Aid Decision Making

Profit Planning

Flexible Budgets and Performance Analysis

Standard Costs and Variances

Performance Measurement in Decentralized Organizations

Differential Analysis: The Key to Decision Making

Capital Budgeting Decisions

Statement of Cash Flows

Financial Statement Analysis

Least-Squares Regression Computations

Appendix B: Cost of Quality

The Predetermined Overhead Rate and Capacity

Further Classification of Labor Costs

Fifo Method

Service Department Allocations

Abc Action Analysis

Using a Modified Form of Activity-Based Costing to Determine Product Costs for External Reports

Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System

Journal Entries to Record Variances

Transfer Pricing

Service Department Charges

The Concept of Present Value

Income Taxes in Capital Budgeting Decisions

The Direct Method of Determining the Net Cash Provided by Operating Activities

Profitability Analysis

Filters