Question 1

All of the following are correct statements about the market-based approach except that it

Accepted Answer

A) assumes that the transfer price should be based on the most objective inputs possible. 
B) provides a fairer allocation of the company's contribution margin to each division. 
C) produces a higher company contribution margin than the cost-based approach. 
D) ensures that each division manager is properly motivated and rewarded. 
A) assumes that the transfer price should be based on the most objective inputs possible. 
B) provides a fairer allocation of the company's contribution margin to each division. 
C) produces a higher company contribution margin than the cost-based approach. 
D) ensures that each division manager is properly motivated and rewarded.

Question 2

A company must price its product to cover its costs and earn a reasonable profit in

Accepted Answer

A) all cases. 
B) its early years. 
C) the long run. 
D) the short run. 
A) all cases. 
B) its early years. 
C) the long run. 
D) the short run.

Question 3

In most cases, prices are set by the

Accepted Answer

A) customers. 
B) competitive market. 
C) largest competitor. 
D) selling company. 
A) customers. 
B) competitive market. 
C) largest competitor. 
D) selling company.

Question 4

The labor charge per hour in time-and-material pricing includes all of the following except

Accepted Answer

A) an allowance for a desired profit. 
B) charges for labor loading. 
C) selling and administrative costs. 
D) overhead costs. 
A) an allowance for a desired profit. 
B) charges for labor loading. 
C) selling and administrative costs. 
D) overhead costs.

Question 5

There are two approaches for determining a transfer price: cost-based and market-based.

Accepted Answer

A) True 
 B)False

Question 6

The difference between the target price and the desired profit is the target cost of the product.

Accepted Answer

A) True 
 B)False

Question 7

In cost-plus pricing, the markup consists of

Accepted Answer

A) manufacturing costs. 
B) desired ROI. 
C) selling and administrative costs. 
D) total cost and desired ROI. 
A) manufacturing costs. 
B) desired ROI. 
C) selling and administrative costs. 
D) total cost and desired ROI.

Question 8

The markup percentage in the absorption-cost approach is computed by dividing the sum of the desired ROI per unit and

Accepted Answer

A) fixed costs per unit by manufacturing cost per unit. 
B) fixed costs per unit by variable costs per unit. 
C) selling and administrative expenses per unit by manufacturing cost per unit. 
D) selling and administrative expenses per unit by variable costs per unit. 
A) fixed costs per unit by manufacturing cost per unit. 
B) fixed costs per unit by variable costs per unit. 
C) selling and administrative expenses per unit by manufacturing cost per unit. 
D) selling and administrative expenses per unit by variable costs per unit.

Question 9

If a cost-based transfer price is used, the transfer price must be based on variable cost.

Accepted Answer

A) True 
 B)False

Question 10

The cost-plus pricing approach establishes a cost base and adds a markup to this base to determine a target selling price.

Accepted Answer

A) True 
 B)False

Question 11

Negotiated transfer pricing is not always used because of each of the following reasons except that

Accepted Answer

A) market price information is sometimes not easily obtainable. 
B) a lack of trust between the negotiating divisions may lead to a breakdown in the negotiations. 
C) negotiations often lead to different pricing strategies from division to division. 
D) opportunity cost is sometimes not determinable. 
A) market price information is sometimes not easily obtainable. 
B) a lack of trust between the negotiating divisions may lead to a breakdown in the negotiations. 
C) negotiations often lead to different pricing strategies from division to division. 
D) opportunity cost is sometimes not determinable.

Question 12

In a competitive market, a company is forced to act as a price taker and must emphasize minimizing and controlling costs.

Accepted Answer

A) True 
 B)False

Question 13

In the cost-plus pricing approach, the desired ROI per unit is computed by multiplying the ROI percentage by

Accepted Answer

A) fixed costs. 
B) total assets. 
C) total costs. 
D) variable costs. 
A) fixed costs. 
B) total assets. 
C) total costs. 
D) variable costs.

Question 14

All of the following are approaches for determining a transfer price except the

Accepted Answer

A) cost-based approach. 
B) market-based approach. 
C) negotiated approach. 
D) time-and-material approach. 
A) cost-based approach. 
B) market-based approach. 
C) negotiated approach. 
D) time-and-material approach.

Question 15

Use the following information for questions 
Papillon Co. has determined the following per unit amounts: $$\begin{array} { l r l r } 
\text { Direct materials } & \$ 30 & \text { Fixed selling and administrative } & \$ 60 \
\text { Direct labor } & 36 & \text { Variable overhead } & 24 \
\text { Desired ROl } & 33 & \text { Variable selling and administrative } & 15 \
\text { Fixed overhead } & 45 & &
\end{array}$$
-The target selling price using the absorption-cost approach is

Accepted Answer

A) $351. 
B) $243. 
C) $162. 
D) $371. 
A) $351. 
B) $243. 
C) $162. 
D) $371.

Question 16

Use the following information for questions 
Brislin Products has a new product going on the market next year. The following data are projections for production and sales: $$\begin{array} { l l } 
\text { Variable costs } & \$ 250,000 \
\text { Fixed costs } & \$ 450,000 \
\text { ROl } & 14 \% \
\text { Investment } & \$ 2,000,000 \
\text { Sales } & 200,000 \text { units }
\end{array}$$
-What is the markup percentage?

Accepted Answer

A) 112% 
B) 20% 
C) 62% 
D) 40% 
A) 112% 
B) 20% 
C) 62% 
D) 40%

Question 17

In a competitive environment, the company must set a target cost and a target selling price.

Accepted Answer

A) True 
 B)False

Question 18

Using the negotiated transfer pricing approach, a minimum transfer price is established by the selling division.

Accepted Answer

A) True 
 B)False

Question 19

Bellingham Suit Co.has received a shipment of suits that cost $200 each.If the company uses cost-plus pricing and applies a markup percentage of 60%, what is the sales price per suit?

Accepted Answer

A) $333 
B) $320 
C) $280 
D) $500 
A) $333 
B) $320 
C) $280 
D) $500

Question 20

Use the following information for questions 
Lonely Guy Repair Service recently performed repair services for a customer that totaled $400. Somehow the bill was lost and the company accountant was trying to recreate the bill from memory. This is what was remembered: $$\begin{array} { l l } 
\text { Total bill } & \$ 600 \
\text { Labor profit margin } & \$ 10 \
\text { Materials profit margin } & 20 \% \
\text { Total labor charges } & \$ 390 \
\text { Cost of materials used } & \$ 120 \
\text { Total hourly cost } & \$ 22.50
\end{array}$$
-What was the material loading charge?

Accepted Answer

A) 37.5% 
B) 43.8% 
C) 61.3% 
D) 75% 
A) 37.5% 
B) 43.8% 
C) 61.3% 
D) 75%

All of the following are correct statements about the market-based approach except that it

A company must price its product to cover its costs and earn a reasonable profit in

In most cases, prices are set by the

The labor charge per hour in time-and-material pricing includes all of the following except

There are two approaches for determining a transfer price: cost-based and market-based.

The difference between the target price and the desired profit is the target cost of the product.

In cost-plus pricing, the markup consists of

The markup percentage in the absorption-cost approach is computed by dividing the sum of the desired ROI per unit and

If a cost-based transfer price is used, the transfer price must be based on variable cost.

The cost-plus pricing approach establishes a cost base and adds a markup to this base to determine a target selling price.

Negotiated transfer pricing is not always used because of each of the following reasons except that

In a competitive market, a company is forced to act as a price taker and must emphasize minimizing and controlling costs.

In the cost-plus pricing approach, the desired ROI per unit is computed by multiplying the ROI percentage by

All of the following are approaches for determining a transfer price except the

In a competitive environment, the company must set a target cost and a target selling price.

Using the negotiated transfer pricing approach, a minimum transfer price is established by the selling division.

Bellingham Suit Co.has received a shipment of suits that cost $200 each.If the company uses cost-plus pricing and applies a markup percentage of 60%, what is the sales price per suit?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Time Value of Money

Filters

Exam 8: Reporting and Analyzing Receivables

All of the following are correct statements about the market-based approach except that it

A company must price its product to cover its costs and earn a reasonable profit in

In most cases, prices are set by the

The labor charge per hour in time-and-material pricing includes all of the following except

There are two approaches for determining a transfer price: cost-based and market-based.

The difference between the target price and the desired profit is the target cost of the product.

In cost-plus pricing, the markup consists of

The markup percentage in the absorption-cost approach is computed by dividing the sum of the desired ROI per unit and

If a cost-based transfer price is used, the transfer price must be based on variable cost.

The cost-plus pricing approach establishes a cost base and adds a markup to this base to determine a target selling price.

Negotiated transfer pricing is not always used because of each of the following reasons except that

In a competitive market, a company is forced to act as a price taker and must emphasize minimizing and controlling costs.

In the cost-plus pricing approach, the desired ROI per unit is computed by multiplying the ROI percentage by

All of the following are approaches for determining a transfer price except the

In a competitive environment, the company must set a target cost and a target selling price.

Using the negotiated transfer pricing approach, a minimum transfer price is established by the selling division.

Bellingham Suit Co.has received a shipment of suits that cost $200 each.If the company uses cost-plus pricing and applies a markup percentage of 60%, what is the sales price per suit?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Time Value of Money

Filters