Exam 5: Relevant Information and Decision Making With a Focus on Pricing Decisions

Discriminatory pricing occurs when a firm sets _____.

Prices based on variable costs

The choice of the absorption or contribution approach affects a firm's contribution margin because _____.

Managers may use different markup rates for different categories of costs.

At some point, marginal costs begin to rise with increases in production because facilities become inefficient.

The choice of the absorption or contribution approach affects the manufacturing cost per unit because the manufacturing cost per unit is _____.

Precise but irrelevant information may still be useful for decision making.

A company will bid near the minimum sales price to establish a presence in new markets or with a new customer.

Hawk Company provided the following information regarding its only product--skateboards. Direct materials used \ 375,000 Direct labor 170,000 Fixed overhead 95,000 Variable overhead 20,000 Variable selling and administrative 55,000 Units produced and sold 40,000 The manufacturing cost per unit, if the contribution approach is used, is _____.

Pricing is not discriminatory if it reflects a cost differential incurred in providing the good or service.

Accountants are sometimes forced to trade relevant information for accurate information.

Aspects of decision making for which measurement in dollars and cents is difficult and imprecise

Marginal revenue is the additional revenue resulting from the sale of an additional unit.

In imperfect competition, a firm must increase the sales price to generate additional sales.

Relevant information might have an element of difference among alternatives.

Missouri Company has a current production capacity level of 200,000 units per month. At this level of production, variable costs are $0.50 per unit and fixed costs are $0.50 per unit.Current monthly sales are 173,000 units.Gates Company has contacted Missouri Company about purchasing 20,000 units at $1.00 each.Current sales would not be affected by the special order and no additional fixed costs would be incurred on the special order.Missouri Company's change in profits if the order is accepted will be a _____:

Each month Fig Company produces 11,000 units of a product that sells for $18 per unit, and has variable costs of $12 per unit.Total fixed costs for the month are $77,000.A special order is received for 5,000 units at a price of $14 per unit.Fig Company has adequate capacity for the special order.Relevant to the decision of whether to accept or reject this special order is the _____.

Charging different prices to different customers for the same product or service

Small price increases causes large volume declines

There will not be occasions when irrelevant data will be included in the accountant's presentation of analysis.