Exam 14: Strategic Management of Costs

The price used to record exchanges of goods and services inside an organization is called a:

Because of grants, donations, and interest from endowed funds, not-for-profit organizations generally:

Under what circumstances is penetration pricing considered legal in Canada?

Market-based prices are influenced by all of the following except:

Market-based prices are normally determined using some measure of:

What do accountants use to estimate the effects of price changes on sales volume?

An ideal transfer price would be the opportunity cost of internal transfers.

Division A of Sibley, Inc. has operating data as follows: Capacity 20,000 units Selling price \ 80 per unit Variable costs \ 45 per unit Fixed costs \ 20 per unit Division B wants to purchase units from Division A. If Division A agrees to sell units to Division B, A's variable costs will be $5 less per unit. If Division A is operating at capacity, what is the minimum price it should charge?

Division A produces a component for Hielkema Company's main product - automobiles. The division operates as a profit centre. It also sells to outsiders. The present selling price is $75 per component. The company buys 600,000 units of a similar component per year from outside sources. The external purchase price is $73 as a result of a quantity discount. Division A has adequate capacity to supply the needs of the Assembly division. The following data are for Division A: Direct material \ 30 per unit Direct labour \ 25 per unit Variable overhead \ 10 per unit Fixed overhead (based on a capacity of 5,000 units) \ 6 per unit The price range within which A would sell components to the Assembly Division is:

In cost-based pricing, managers must use only variable costs in the cost base.

Low prices are not considered predatory if:

BLG Corporation produces and sells yachts for wealthy customers. BLG's accountants produced the data shown below as a basis for client negotiations for the coming year: Biq Winner Sport Star CEO Basic yacht \ 600 \ 600 \ 600 Customization costs 300 500 200 Marketing costs 100 400 300 Total costs \ 1,000 \ 1,500 \ 1,100 Assume that all the preceding costs are avoidable. The company will incur an additional $800 in unavoidable costs during the coming year. BLG's managers want to achieve a profit margin of 80% based on total costs. Which customer's yacht will have the lowest total cost if unavoidable costs are allocated based on the cost of a basic yacht?

In cost-based pricing, mark-up percentages often originate from general industry practice.

Companies sometimes use competitors' prices to establish their own prices.

Division A of Sibley, Inc. has operating data as follows: Capacity 20,000 units Selling price \ 80 per unit Variable costs \ 45 per unit Fixed costs \ 20 per unit Division B wants to purchase units from Division A. If Division A agrees to sell units to Division B, A's variable costs will be $5 less per unit. If Division A has capacity available to meet B's requirements, what is the minimum price it should charge?

The Mukilteo Division of Snohomish Corp. produces and sells a product to outside and internal customers. Per-unit data collected from its operations include: Outside sales price \ 640 Direct materials 105 Direct labour 250 Fixed overhead 180 If Mukilteo is operating at full capacity and selling solely to outside customers, what price should another division pay for Mukilteo's product?

TTV Corporation's managers estimate that a 50% increase in price would cause an 80% reduction in the quantity of product sold. Total fixed costs for the product are $5,000 and total variable costs are $4,000, based on production of 400 units. The following values may be useful: (0.2)=-1.609(1.5)=0.405 (0.5)=-0.693(4,000)=8.294 (0.8)=-0.223(5,000)=8.517 TTV's profit maximizing price is:

Market-based pricing:

Which of the following are generally illegal in Canada? I. Price discrimination II. Predatory pricing III. Price gouging

Governments often require the following type of transfer price for income taxes: