Exam 5: Relevant Information and Decision-Making: Marketing Decisions

Full cost means the total of all variable manufacturing costs and all fixed manufacturing costs.

Costs that continue even if an operation is halted

The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced at a low enough cost to provide an adequate profit margin is referred to as:

The marginal cost often increases as production increases up to a point because of efficiencies created by larger amounts.

Citrus Industries has three product lines, A, B, and C. The following information is available: Sales \ 60,000 \ 90,000 \ 24,000 Variable costs Contribution margin \ 24,000 \ 42,000 \ 4,000 Fixed costs: Avoidable 18,000 3,000 Unavoidable Operating income Assuming Citrus Industries can increase the selling price of product C to $30,000, all other information remaining constant, operating income will:

Product design affects a minimal amount of costs.

Which of the following is the key question in decision making?

Target costing is especially important when product life cycles are long.

Fitzgerald, Inc., provided the following information regarding its one and only product-ice skates: Fixed manufacturing costs \ 420,000 Fixed selling and adminis trative costs 80,000 Fixed manufacturing costs 42,000 Fixed selling and adminis trative costs 80,000 Variable manuf acturing costs 1,030,000 Variable s elling and administrative costs 120,000 Selling unit price 100 Units produced and sold 20,000 is the unit cost of a pair of ice skates using the full cost approach.

Companies use cost- plus pricing for products where management actions can influence the market price.

Comfy Fit Company makes three sizes of shirts, Small, Medium, and Large, on one assembly line that has a limit of 600 labor- hours per week. Comfy Fit Company can sell all the shirts it can make under current operating capacity. Manufacturing information per shirt for each product is as follows: Small Medium Large Selling pric e \ 8 \ 12 \ 15 Variable costs 5 6 10 Labor- hours per shirt 0.3 0.5 1.0 Requirements: Determine the weekly contribution margin when all labor- hours are allotted to the product with the highest: a. unit selling price. b. unit contribution margin. c. contribution per labor- hour.

is the item that restricts or constrains the production or sale of a product or service.

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

The expected maximum sales price for a good or service depends on the costs associated with that good or service.