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

In imperfect competition:

A one- time- only special order decision:

Information may be relevant for one decision and the same information may be irrelevant for another decision.

is the process of putting a decision into action.

Nonfinancial information can influence decisions to add or delete products.

Qualitative aspects of information do not carry more weight than quantitative aspects in a business decision.

Cerveza Manufacturing is considering producing a new product. Cerveza Manufacturing expects that it will sell 12,000 units over the product's expected 4- year life. Variable production costs and variable selling costs are estimated at $42 and $16 per unit, respectively. Annual fixed production and fixed selling costs are estimated at $15,000 and $5,000, respectively. Research and development costs are estimated at $184,000. If the product sells for $92 per unit, the average target markup for selling prices using a full cost approach is:

Sherbet Manufacturing is considering producing a new product. Sherbet Manufacturing expects that it will sell 2,000 units over the product's expected 4- year life. Variable production costs and variable selling costs are estimated at $42 and $16 per unit, respectively. Annual fixed production and fixed selling costs are estimated at $15,000 and $5,000, respectively. _ is the total fixed cost over the product life cycle.

Marx Company has a current production capacity level of 200,000 units per month. At this level of production, variable costs are $0.50 per unit and fixed costs are $0.50 per unit. Current monthly sales are 183,000 units. Heaven Company has contacted Marx Company about purchasing 15,000 units at $1.00 each. Current sales would not be affected by the special order and no additional fixed costs would be incurred on the special order. Marx Company's change in profits if the order is accepted will be:

James Corporation manufactures two products, XX and YY. The following information was gathered: XX YY Selling price per unit \ 37.00 \ 26.00 Variable cost per unit 32.00 22.00 Total fixed costs \ 18,000 If James Corporation could produce and sell either 10,000 units of XX or 5,000 units of YY at full capacity, it should produce and sell:

Distinguish between the quantitative and qualitative aspects of decisions.

Which of the statements below is false regarding special order decisions?

Markup is the amount by which cost exceeds price.

The total of all manufacturing costs plus the total of all selling and administrative costs is equal to:

Hayden Company has budgeted sales of $30,000 with the following budgeted costs: Direct materials \ 6,300 Direct labor Factory overhead: Variable 3,700 Fixed 5,600 Selling and administrative expenses: Variable $\quad 2,400$ Fixed $\quad 3,200$ Compute the average target markup for setting prices as a percentage of: a. Prime costs b. Total costs c. Total variable costs d. Variable manufacturing costs e. Total manufacturing costs

A market in which a firm can sell as much of a product as it can produce, all at a single market price

Yippee Industries budgeted the following costs for the production of its one and only product, golf balls, for the next fiscal year: Materials \ 35,000 Labor 25,000 Overhead: Variable 30,000 Fixed 15,000 Selling and administrative: Variable 7,500 Fixed Total costs \ 125,000 Yippee Industries has a target profit of $30,000. _ is the target price.

Marginal cost is:

Brown Industries has budgeted sales of $49,500 with the following budgeted costs: Direct materials \ 15,000 Direct labor 5,000 Factory overh ead: Variable 6,000 Fixed 7,000 Selling and administrative expenses: Variable $\quad 4,500$ Fixed 6,000 Compute the average target markup for setting prices as a percentage of: a. Total manufacturing costs b. Total variable costs c. Total costs d. Variable manufacturing costs

Decisions might affect the past.