Question 1

The transfer price approach that will result in the largest contribution margin to the buying division is the

Accepted Answer

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

Question 2

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 3

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 4

In most cases, a company sets the price instead of it being set by the competitive market.

Accepted Answer

A) True 
 B)False

Question 5

In time-and-material pricing, the material charge is based on the cost of direct materials used and a material loading charge for related overhead costs.

Accepted Answer

A) True 
 B)False

Question 6

Dudly Drafting Services uses a 45% material loading charge and a labor rate of $20 per hour. How much will be charged on a job that requires 3.5 hours of work and $40 of materials?

Accepted Answer

A)  $128 
B)  $110 
C)  $88 
D)  $133 
A)  $128 
B)  $110 
C)  $88 
D)  $133

Question 7

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 8

Differences in tax rates between countries can complicate the determination of the appropriate transfer price.

Accepted Answer

A) True 
 B)False

Question 9

Use the following information for questions 
The Selling Division's unit sales price is $25 and its unit variable cost is $15. Its capacity is 10,000 units. Fixed costs per unit are $6. Current outside sales are 8,000 units.
-What is the Selling Division's opportunity cost per unit from selling 3,000 units to the Purchasing Division?

Accepted Answer

A)  $10 
B)  $25 
C)  $4 
D)  $0 
A)  $10 
B)  $25 
C)  $4 
D)  $0

Question 10

Under the negotiated transfer pricing approach, the maximum transfer price is established by the

Accepted Answer

A)  purchasing division. 
B)  corporate headquarters management. 
C)  selling division. 
D)  corporate negotiator. 
A)  purchasing division. 
B)  corporate headquarters management. 
C)  selling division. 
D)  corporate negotiator.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

The negotiated transfer price approach should be used when

Accepted Answer

A)  the selling division has available capacity and is willing to accept less than the market price. 
B)  an outside market for the goods does not exist. 
C)  no market price is available. 
D)  any of these situations exist. 
A)  the selling division has available capacity and is willing to accept less than the market price. 
B)  an outside market for the goods does not exist. 
C)  no market price is available. 
D)  any of these situations exist.

Question 13

A company using cost-plus pricing has an ROI of 24%, total sales of 20,000 units and a desired ROI per unit of $30. What was the amount of investment?

Accepted Answer

A)  $144,000 
B)  $2,500,000 
C)  $456,000 
D)  $789,475 
A)  $144,000 
B)  $2,500,000 
C)  $456,000 
D)  $789,475

Question 14

Bryson Company has just developed a new product. The following data is available for this product: $$\begin{array} { l r } 
\text { Desired ROl per unit } & \$ 30 \
\text { Fixed cost per unit } & 50 \
\text { Variable cost per unit } & 75 \
\text { Total cost per unit } & 125
\end{array}$$ The target selling price for this product is

Accepted Answer

A)  $155. 
B)  $125. 
C)  $105. 
D)  $80. 
A)  $155. 
B)  $125. 
C)  $105. 
D)  $80.

Question 15

A negotiated transfer price should be used when an outside market for the goods does not exist.

Accepted Answer

A) True 
 B)False

Question 16

The calculation to determine target cost is

Accepted Answer

A)  variable manufacturing costs + fixed manufacturing costs. 
B)  sales price - (variable manufacturing costs + fixed manufacturing costs). 
C)  variable manufacturing costs + selling and administrative variable costs. 
D)  sales price - desired profit. 
A)  variable manufacturing costs + fixed manufacturing costs. 
B)  sales price - (variable manufacturing costs + fixed manufacturing costs). 
C)  variable manufacturing costs + selling and administrative variable costs. 
D)  sales price - desired profit.

Question 17

All of the following are factors that can affect pricing decisions except

Accepted Answer

A)  cost considerations. 
B)  demand. 
C)  environment. 
D)  All of these are factors. 
A)  cost considerations. 
B)  demand. 
C)  environment. 
D)  All of these are factors.

Question 18

Prices are set by the competitive market when

Accepted Answer

A)  the product is specially made for a customer. 
B)  there are no other producers capable of manufacturing a similar item. 
C)  a company can effectively differentiate its product from others. 
D)  a product is not easily distinguished from competing products. 
A)  the product is specially made for a customer. 
B)  there are no other producers capable of manufacturing a similar item. 
C)  a company can effectively differentiate its product from others. 
D)  a product is not easily distinguished from competing products.

Question 19

Under the negotiated transfer pricing approach, the minimum transfer price is established by the

Accepted Answer

A)  purchasing division. 
B)  corporate headquarters management. 
C)  selling division. 
D)  corporate negotiator. 
A)  purchasing division. 
B)  corporate headquarters management. 
C)  selling division. 
D)  corporate negotiator.

Question 20

In the formula for a minimum transfer price, opportunity cost is the contribution margin of goods sold externally.

Accepted Answer

A) True 
 B)False

The transfer price approach that will result in the largest contribution margin to the buying division is the

In cost-plus pricing, the markup consists of

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

In most cases, a company sets the price instead of it being set by the competitive market.

In time-and-material pricing, the material charge is based on the cost of direct materials used and a material loading charge for related overhead costs.

Dudly Drafting Services uses a 45% material loading charge and a labor rate of $20 per hour. How much will be charged on a job that requires 3.5 hours of work and $40 of materials?

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

Differences in tax rates between countries can complicate the determination of the appropriate transfer price.

Under the negotiated transfer pricing approach, the maximum transfer price is established by the

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

The negotiated transfer price approach should be used when

A company using cost-plus pricing has an ROI of 24%, total sales of 20,000 units and a desired ROI per unit of $30. What was the amount of investment?

Bryson Company has just developed a new product. The following data is available for this product: Desired ROl per unit \ 30 Fixed cost per unit 50 Variable cost per unit 75 Total cost per unit 125 The target selling price for this product is

A negotiated transfer price should be used when an outside market for the goods does not exist.

The calculation to determine target cost is

All of the following are factors that can affect pricing decisions except

Prices are set by the competitive market when

Under the negotiated transfer pricing approach, the minimum transfer price is established by the

In the formula for a minimum transfer price, opportunity cost is the contribution margin of goods sold externally.

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

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Exam 8: Pricing

The transfer price approach that will result in the largest contribution margin to the buying division is the

In cost-plus pricing, the markup consists of

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

In most cases, a company sets the price instead of it being set by the competitive market.

In time-and-material pricing, the material charge is based on the cost of direct materials used and a material loading charge for related overhead costs.

Dudly Drafting Services uses a 45% material loading charge and a labor rate of $20 per hour. How much will be charged on a job that requires 3.5 hours of work and $40 of materials?

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

Differences in tax rates between countries can complicate the determination of the appropriate transfer price.

Under the negotiated transfer pricing approach, the maximum transfer price is established by the

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

The negotiated transfer price approach should be used when

A company using cost-plus pricing has an ROI of 24%, total sales of 20,000 units and a desired ROI per unit of $30. What was the amount of investment?

Bryson Company has just developed a new product. The following data is available for this product: Desired ROl per unit \ 30 Fixed cost per unit 50 Variable cost per unit 75 Total cost per unit 125 The target selling price for this product is

A negotiated transfer price should be used when an outside market for the goods does not exist.

The calculation to determine target cost is

All of the following are factors that can affect pricing decisions except

Prices are set by the competitive market when

Under the negotiated transfer pricing approach, the minimum transfer price is established by the

In the formula for a minimum transfer price, opportunity cost is the contribution margin of goods sold externally.

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