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

is the additional cost resulting from producing and selling one additional unit.

In perfect competition, the marginal revenue curve is a vertical line equal to the price per unit at all volumes of sales.

Decision makers should be aware of unit costs, and when in doubt, they should convert all unit costs into total costs under each alternative to get "the big picture."

According to courts in the United States, pricing is predatory only if companies set prices below their average total cost and actually lose money in order to drive their competitors out of business.

Unavoidable costs do not include common costs.

Sampras Industries budgeted the following costs for the production of its one and only product, tennis 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 Sampras Industries has a target profit of $30,000. The average target markup for setting prices as a percentage of total costs would be:

In deciding whether to add or delete a product, service, or department, the salary of the plant manager is an:

In managerial accounting, marginal cost is essentially the variable cost.

is the average number of times the inventory is sold per year.

When deciding whether to replace a product, service, or department, managers should choose the alternative that has:

In the short run, the sales price of a good or service must be high enough to cover all costs.

Emergency Manufacturing is considering producing a new product. Emergency 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. Research and development costs are estimated at $184,000. If the product sells for $200 per unit, the expected profit over the entire product life cycle is:

Predatory pricing occurs when a firm:

The total- manufacturing- cost and full- cost approaches often fail to highlight different cost behavior patterns.

The total of all manufacturing costs plus the total of all selling and administrative costs

In considering whether or not to produce a single product, the associated direct materials and direct labor costs would probably be:

Imprecise but relevant information can be useful.

Cover- up manufactures two products, Hats and Caps. The following information is available: Hats Selling price p er unit \ 21 \ 13 Variable cost per unit \ 12 \ 9 Labor hour s required 3 1 Tot al fixed costs \ 52,000 Labor hour capacity for the year is 15,000 hours. Required: a. Which product has the higher contribution margin per unit? b. Which product has the higher contribution margin per hour? c. Assume that Cover- up can produce only one product. What will net income be?

In deciding whether or not to add or delete a product or service, common costs are probably:

In retail sales, the limiting resource is often floor space.