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

The profit maximizing volume is the quantities at which marginal cost equals price.

Overcapacity in some countries often causes aggressive pricing policies, particularly for a company's imported goods.

are never relevant in the decision- making process.

Peterson Company produces and sells 20,000 units at $20 per unit. Peterson Company's product cost is calculated as follows: Variable-unit-based costs \ 8 per unit Fixed costs \ 2 per unit Set-up costs \ 3 per unit \ 13 per unit A total of 500 set- ups at a cost of $120 per set- up are required to produce the 20,000 units. Peterson Company has received a special order to sell 5,000 units at $12 per unit. Peterson Company has excess capacity available, but these 5,000 would require 60 set- ups. If Peterson Company accepts the special order, Peterson Company's net income will:

Costs that will not continue if an ongoing operation is changed or deleted

Video Company manufactures two products, A and B. The following information was gathered: A B Selling price p er unit \ 54.00 \ 66.00 V ariable cost per unit 39.00 54.00 Total fixed costs \ 25,000 Video Company manufactures and sells three units of A for every two units of B. If the company sold 1,500 units of A, it would report operating income (loss) of:

Total manufacturing costs or full- cost pricing is more widely used in practice than the contribution margin approach to pricing.

is not normally included in the accounting information provided to the decision maker.

Inventory turnover is the average number of times a consumer buys a particular product per year.

Establishing prices so low that competitors are driven out of a market

Relevant costs are only variable.

Accountants are sometimes forced to trade relevant information for accurate information.

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

A decision model is any method used for making a choice, sometimes requiring elaborate qualitative procedures.

Target pricing with full costing presumes a given volume level.

Factors that are usually important in determining the feasibility of earning the desired target profit margin include inflation and interest rates.

Vanilla Manufacturing is considering producing a new product. Vanilla Manufacturing expects that it will sell 12,000 units over the life of the product. 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. _ is the total variable cost over the product life cycle.

Game Company manufactures two products, A and B. The following information was gathered: A B Selling price per unit \5 4.00 \6 6.00 Variable cost per unit 39.00 54.00 $\text { Total fixed costs } \quad \$ 30,000$ Assume Game Company could produce and sell any mix of products A and B at full capacity. If product A takes twice as long to manufacture as product B and only 120,000 hours of plant capacity are available, it is best for Game Company to produce:

Value engineering is used primarily during the production stage of the value chain.

A small appliance manufacturer is deciding whether to accept or reject a special order for 1,000 units. There is sufficient capacity available for the order. is relevant for this decision.