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

In imperfect competition, a firm must increase the sales price to generate additional sales.

Fixed cost per unit of product = total fixed manufacturing costs / some selected volume level.

McNair Company has been producing and selling 40,000 skillets a year. McNair Company has the capacity to produce 50,000 skillets with its present facilities. The following information is also available: Selling price per unit \ 30 Variable costs per unit: M anuf acturing 11 Selling and Administrative 5 Fixed costs in total: M anuf acturing \ 128,000 Selling and Admini str ative 56,000 is the cost per skillet using the total manufacturing cost approach.

In a special order decision, fixed costs that do not differ between two alternatives are:

McCarville, Inc., provided the following information regarding its one and only product-scissors: 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 current net income.

Liberty Corporation has three departments. Data for the most recent year is presented below: Sales \ 400 \ 200 \ 80 Variable exp enses 128 52 34 Fixed expenses: Unavoidable 96 52 12 Avoidable 116 104 54 Required: a. Compute the operating income of the company. b. Compute the contribution margin and operating income of each department. c. Should any department(s) be eliminated? If any, which one(s) and why?

Discriminatory pricing occurs when a firm:

Bradley's Department Store can sell either products A or B. The following information was gathered: Retail price per unit \ 54.00 \ 33.00 Cost of merchandise 43.00 27.00 If Bradley's Department Store can sell either 8,000 units of A or 18,000 units of B at full capacity, it should sell:

In a decision making process, the accountant's primary role is:

Choosing among several courses of action

is true about prediction methods.

is a pricing decision.

Bulger Corporation has been producing and selling 40,000 hats a year. The Bulger Corporation has the capacity to produce 50,000 hats with its present facilities. The following information is also available: Selling price per unit \ 30 Variable costs per unit: Manufacturing 11 Selling and A dminis trative 5 Fixed costs in total: Manufacturing \ 128,000 Selling and A dminis trative 56,000 If a special order is accepted for 10,000 hats at a price of $25 per unit, net income would:

The degree to which information is relevant or precise often depends on the degree to which it is qualitative or quantitative.

How might you use target costing to decide whether to add a new product?

Discriminatory pricing is the act of charging different prices to different customers for the same product or service.

A market in which the price a firm charges for a unit will influence the quantity of units it sells

Alta Loma Industries has three product lines, A, B, and C. The following information is available: Sales \ 100,000 \ 90,000 \ 36,000 Variable costs 76,000 48,000 27,000 Contribution \ 24,000 \ 42,000 \ 9,000 margin Fixed costs: Avoidable 9,000 18,000 3,000 Unavoidable 6,000 9,000 8,400 Operating income \9 ,000 \1 5,000 \2 ,400 Assume that product line C is discontinued and replaced with product line B. This will double the production and sales of product line B without increasing fixed costs. Operating income will:

Yetmar Corporation produces two products, Pots and Pans. The following information is available for these two products: Selling price per unit \ 25.00 \ 15.00 Variable cost per unit 12.00 9.00 Total fixed costs \ 15,000 Total production capacity 10,000 units If a maximum of 7,000 units of each product can be sold, it would be best to:

Relevant costs may include fixed avoidable costs.