Exam 14: Pricing Products and Services

Hostetter Corporation would like to use target costing for a new product it is considering introducing.At a selling price of $30 per unit,management projects sales of 30,000 units.The new product would require an investment of $200,000.The desired return on investment is 13%.The target cost per unit is closest to:

The more sensitive customers are to price,

Pasternack Corporation 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 $23.10 per unit. 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.

Diehl Company 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 $420,000 in this product and expects a return on investment of 8%. Direct labor is a variable cost in this company. -If every 10% increase in price leads to an 11% decrease in quantity sold,the profit-maximizing price is closest to:

Diehl Company 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 $420,000 in this product and expects a return on investment of 8%. Direct labor is a variable cost in this company. -The markup on absorption cost is closest to:

The following information is available on Product A: The company uses the absorption costing approach to cost-plus pricing described in the text.Based on these data,the total selling and administrative expenses each year would be:

Coble 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 $15.70 per unit. -The product's profit-maximizing price according to the formula in the text is closest to:

The management of Fanton Corporation is considering introducing a new product--a compact lawn blower.At a selling price of $38 per unit,management projects sales of 60,000 units.The lawn blower would require an investment of $500,000.The desired return on investment is 18%. -The desired profit according to the target costing calculations is:

The optimal selling price for a product depends

Gorsche Company's management has found that every 3% increase in the selling price of one of the company's products leads to a 8% decrease in the product's total unit sales.The product's absorption costing unit product cost is $11.50.The variable production cost of the product is $6.20 per unit and the variable selling and administrative cost is $1.00 per unit. According to the formula in the text,the product's profit-maximizing price is closest to:

Harvey 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 price elasticity of demand as defined in the text is closest to:

Roal 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 37,000 units per year. The company has invested $220,000 in this product and expects a return on investment of 9%. Required: a.Compute the markup on absorption cost. b.Compute the selling price of the product using the absorption costing approach.

The management of Matsuura Corporation would like to set the selling price on a new product using the absorption costing approach to cost-plus pricing.The company's accounting department has supplied the following estimates for the new product: Management plans to produce and sell 1,000 units of the new product annually.The new product would require an investment of $254,000 and has a required return on investment of 10%. -The unit target selling price using the absorption costing approach is closest to:

Kirby,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 19,000 units per year. The company has invested $580,000 in this product and expects a return on investment of 14%. The selling price based on the absorption costing approach would be closest to:

Okino Company's management believes that every 8% increase in the selling price of one of the company's products would lead to a 17% decrease in the product's total unit sales.The variable cost per unit of this product is $44.60. 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.

Nichnols Corporation's marketing manager believes that every 6% decrease in the selling price of one of the company's products would lead to a 18% increase in the product's total unit sales.The product's absorption costing unit product cost is $10.10.The variable production cost is $1.70 per unit and the variable selling and administrative cost is $1.60. 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.

Diehl Company 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 $420,000 in this product and expects a return on investment of 8%. Direct labor is a variable cost in this company. -The selling price based on the absorption costing approach is closest to:

Straus Company,a manufacturer of electronic products,wants to introduce a new calculator.To compete effectively,the calculator could not be priced at more than $40.The company requires a 20% rate of return on investment on all new products.In order to produce and sell 30,000 calculators each year,the company would have to make an investment of $850,000.The target cost per calculator would be:

Hauber Corporation would like to use target costing for a new product it is considering introducing.At a selling price of $26 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 20%. -The desired profit according to the target costing calculations is:

Management of Delaune Corporation is considering a new product,an outdoor speaker that would have a selling price of $45 per unit and projected sales of 70,000 units.Launching the new product would require an investment of $200,000.The desired return on investment is 12%. Required: Determine the target cost per unit for the outdoor speaker.