Question 1

The material loading charge is expressed as a percentage of the total estimated cost of materials for the year.

Accepted Answer

A) True 
 B)False  True

Question 2

The following per unit information is available for a new product of Red Ribbon Company: $$\begin{array} { l r } 
\text { Desired ROI } & \$ 20 \
\text { Fixed cost } & 40 \
\text { Variable cost } & 60 \
\text { Total cost } & 100 \
\text { Selling price } & 120
\end{array}$$ Red Ribbon Company's markup percentage would be

Accepted Answer

A)  17%. 
B)  20%. 
C)  33%. 
D)  50%. 
A)  17%. 
B)  20%. 
C)  33%. 
D)  50%. B

Question 3

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

Accepted Answer

A)  131%. 
B)  102%. 
C)  90%. 
D)  80%. 
A)  131%. 
B)  102%. 
C)  90%. 
D)  80%. D

Question 4

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 5

The maximum transfer price from the buying division's standpoint is the

Accepted Answer

A)  total cost + opportunity cost. 
B)  variable cost + opportunity cost. 
C)  external purchase price. 
D)  external purchase price + opportunity cost. 
A)  total cost + opportunity cost. 
B)  variable cost + opportunity cost. 
C)  external purchase price. 
D)  external purchase price + opportunity cost.

Question 6

The target selling price for this television is

Accepted Answer

A)  $550. 
B)  $1,000. 
C)  $1,050. 
D)  $1,300. 
A)  $550. 
B)  $1,000. 
C)  $1,050. 
D)  $1,300.

Question 7

Use the following information for questions 
The Lumber Division of Paul Bunyon Homes Inc. produces and sells lumber that can be sold to outside customers or within the company to the Construction Division. The following data have been gathered for the coming period: $\begin{array}{ll}\text { Lumber Division: }\
\text { Capacity } & 200,000 \text { board feet } \
\text { Price per board foot } & \$ 2.50 \
\text { Variable production cost per bd. ft. } & \$ 1.25 \
\text { Variable selling cost per bd. ft. } & \$ 0.50\
\text { Construction Division: }\\text { Board feet needed } & 60,000 \
\text { Outside price paid per bd. ft. } & \$ 2.00
\end{array}$ If the Lumber Division sells to the Construction Division, $0.35 per board foot can be saved in shipping costs.
-If the Lumber Division has sufficient excess capacity to fulfill the Construction Division's needs, what will be the effect on the company's overall contribution margin?

Accepted Answer

A)  Decrease by $30,000 
B)  Decrease by $24,000 
C)  Increase by $36,000 
D)  Increase by $33,500 
A)  Decrease by $30,000 
B)  Decrease by $24,000 
C)  Increase by $36,000 
D)  Increase by $33,500

Question 8

Why does the unit selling price increase when expected volume is lower than budgeted volume?

Accepted Answer

A)  Variable costs and fixed costs have to be spread over fewer units. 
B)  Fixed costs and desired ROI have to be spread over fewer units. 
C)  Variable costs and desired ROI have to be spread over fewer units. 
D)  Fixed costs only have to be spread over fewer units. 
A)  Variable costs and fixed costs have to be spread over fewer units. 
B)  Fixed costs and desired ROI have to be spread over fewer units. 
C)  Variable costs and desired ROI have to be spread over fewer units. 
D)  Fixed costs only have to be spread over fewer units.

Question 9

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 10

The markup percentage is

Accepted Answer

A)  20.69%. 
B)  22.59%. 
C)  25%. 
D)  26.09%. 
A)  20.69%. 
B)  22.59%. 
C)  25%. 
D)  26.09%.

Question 11

Which two methods are used most often when establishing a transfer price?

Accepted Answer

A)  Negotiated transfer pricing and cost-based transfer pricing 
B)  Cost-based transfer pricing and market-based transfer pricing 
C)  Negotiated transfer pricing and market-based transfer pricing 
D)  Cost-based transfer pricing and standard-based pricing 
A)  Negotiated transfer pricing and cost-based transfer pricing 
B)  Cost-based transfer pricing and market-based transfer pricing 
C)  Negotiated transfer pricing and market-based transfer pricing 
D)  Cost-based transfer pricing and standard-based pricing

Question 12

Alfredo Co. has collected the following per unit data: $$\begin{array} { l r l r } 
\text { Direct labor } & \$ 8 & \text { Variable selling and admin. } & \$ 3 \
\text { Direct materials } & 5 & \text { Fixed overhead }&1 \
\text { Variable overhead } & 4 & \text { Fixed selling and admin. }&7
\end{array}$$ The markup percentage is 120%. What is the markup amount under the variable-cost approach?

Accepted Answer

A)  $21.60 
B)  $24.00 
C)  $20.40 
D)  $33.60 
A)  $21.60 
B)  $24.00 
C)  $20.40 
D)  $33.60

Question 13

Assume the Thread Division has excess capacity. The Garment Division wants the Thread Division to furnish them additional spools of thread that could be made using the excess capacity. In a negotiated transfer price, the Thread Division should accept as a minimum any transfer price that exceeds the

Accepted Answer

A)  total cost of producing spools for outside sales. 
B)  variable costs of producing the additional spools for the Garment Division. 
C)  contribution margin and outside spool sales. 
D)  foregone contribution margin on outside spool sales. 
A)  total cost of producing spools for outside sales. 
B)  variable costs of producing the additional spools for the Garment Division. 
C)  contribution margin and outside spool sales. 
D)  foregone contribution margin on outside spool sales.

Question 14

Larry Cable Inc. plans to introduce a new product and is using the target cost approach. Projected sales revenue is $810,000 ($4.05 per unit) and target costs are $730,000. What is the desired profit per unit?

Accepted Answer

A)  $0.40 
B)  $2.03 
C)  $3.65 
D)  None of the above 
A)  $0.40 
B)  $2.03 
C)  $3.65 
D)  None of the above

Question 15

The first step for time-and-material pricing is to calculate the material loading charge.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Use the following information for questions 
Carlos Consulting Inc. provides financial consulting and has collected the following data for the next year's budgeted activity for a lead consultant. $$\begin{array} { c l } 
\text { Consultants' wages } & \$ 90,000 \
\text { Fringe benefits } & \$ 22,500 \
\text { Related overhead } & \$ 17,500 \
\text { Supply clerk's wages } & \$ 18,000 \
\text { Fringe benefits } & \$ 4,000 \
\text { Related overhead } & \$ 20,000 \
\text { Profit margin per hour } & \$ 20 \
\text { Profit margin on materials } & 15 \% \
\text { Total estimated consulting hours } & 5,000 \
\text { Total estimated material costs } & \$ 168,000
\end{array}$$
-A consulting job takes 20 hours of consulting time and $180 of materials. The client's bill would be

Accepted Answer

A)  $1,172. 
B)  $772. 
C)  $952. 
D)  $1,100. 
A)  $1,172. 
B)  $772. 
C)  $952. 
D)  $1,100.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

In the absorption-cost approach, the markup percentage covers the

Accepted Answer

A)  desired ROI only. 
B)  desired ROI and selling and administrative expenses. 
C)  desired ROI and fixed costs. 
D)  selling and administrative expenses only. 
A)  desired ROI only. 
B)  desired ROI and selling and administrative expenses. 
C)  desired ROI and fixed costs. 
D)  selling and administrative expenses only.

Question 20

The cost-plus pricing model gives consideration to the demand side-whether customers will pay the target selling price.

Accepted Answer

A) True 
 B)False

The material loading charge is expressed as a percentage of the total estimated cost of materials for the year.

The following per unit information is available for a new product of Red Ribbon Company: Desired ROI \ 20 Fixed cost 40 Variable cost 60 Total cost 100 Selling price 120 Red Ribbon Company's markup percentage would be

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?

The maximum transfer price from the buying division's standpoint is the

The target selling price for this television is

Why does the unit selling price increase when expected volume is lower than budgeted volume?

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

The markup percentage is

Which two methods are used most often when establishing a transfer price?

Alfredo Co. has collected the following per unit data: Direct labor \ 8 Variable selling and admin. \ 3 Direct materials 5 Fixed overhead 1 Variable overhead 4 Fixed selling and admin. 7 The markup percentage is 120%. What is the markup amount under the variable-cost approach?

Assume the Thread Division has excess capacity. The Garment Division wants the Thread Division to furnish them additional spools of thread that could be made using the excess capacity. In a negotiated transfer price, the Thread Division should accept as a minimum any transfer price that exceeds the

Larry Cable Inc. plans to introduce a new product and is using the target cost approach. Projected sales revenue is $810,000 ($4.05 per unit) and target costs are $730,000. What is the desired profit per unit?

The first step for time-and-material pricing is to calculate the material loading charge.

In most cases, prices are set by the

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

In the absorption-cost approach, the markup percentage covers the

The cost-plus pricing model gives consideration to the demand side-whether customers will pay the target selling price.

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 8: Pricing

The material loading charge is expressed as a percentage of the total estimated cost of materials for the year.

The following per unit information is available for a new product of Red Ribbon Company: Desired ROI \ 20 Fixed cost 40 Variable cost 60 Total cost 100 Selling price 120 Red Ribbon Company's markup percentage would be

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?

The maximum transfer price from the buying division's standpoint is the

The target selling price for this television is

Why does the unit selling price increase when expected volume is lower than budgeted volume?

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

The markup percentage is

Which two methods are used most often when establishing a transfer price?

Alfredo Co. has collected the following per unit data: Direct labor \ 8 Variable selling and admin. \ 3 Direct materials 5 Fixed overhead 1 Variable overhead 4 Fixed selling and admin. 7 The markup percentage is 120%. What is the markup amount under the variable-cost approach?

Assume the Thread Division has excess capacity. The Garment Division wants the Thread Division to furnish them additional spools of thread that could be made using the excess capacity. In a negotiated transfer price, the Thread Division should accept as a minimum any transfer price that exceeds the

Larry Cable Inc. plans to introduce a new product and is using the target cost approach. Projected sales revenue is $810,000 ($4.05 per unit) and target costs are $730,000. What is the desired profit per unit?

The first step for time-and-material pricing is to calculate the material loading charge.

In most cases, prices are set by the

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

In the absorption-cost approach, the markup percentage covers the

The cost-plus pricing model gives consideration to the demand side-whether customers will pay the target selling price.

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Financial Statement Analysis

Filters