Question 1

Costing systems measure ________.

Accepted Answer

A)  locked in costs 
B)  sunk costs 
C)  cost incurrence 
D)  out of pocked costs 
A)  locked in costs 
B)  sunk costs 
C)  cost incurrence 
D)  out of pocked costs

Question 2

Which of the following statements is true about the factors that affect pricing decisions?

Accepted Answer

A)  Information about competitors' technologies is not useful for pricing decisions. 
B)  Information about a competitor in a perfect market affects pricing decisions. 
C)  Increase in price of a substitute product does not affect pricing decisions. 
D)  Managers must always be aware of the competition when pricing their products 
A)  Information about competitors' technologies is not useful for pricing decisions. 
B)  Information about a competitor in a perfect market affects pricing decisions. 
C)  Increase in price of a substitute product does not affect pricing decisions. 
D)  Managers must always be aware of the competition when pricing their products

Question 3

Crimpson Company has invested $2,100,000 in a plant to make commercial juicer machines. The target operating income desired from the plant is $305,000 annually. The company plans annual sales of 7400 juicer machines at a selling price of $600 each.
What is the target rate of return on investment for Crimpson Company?

Accepted Answer

A)  6.9% 
B)  7.4% 
C)  14.5% 
D)  12.5% 
A)  6.9% 
B)  7.4% 
C)  14.5% 
D)  12.5%

Question 4

Roberto Inc., operates a chain of luxury hotels in the Asia-Pacific region. It charges $150 for one night stay. However when 90% of the rooms are occupied, Roberto charges a premium of 20% on room tariff for the remaining rooms. What pricing method has Roberto Inc. adopted?

Accepted Answer

A)  customer-preference pricing 
B)  seasonal-load pricing 
C)  peak-load pricing 
D)  capacity pricing 
A)  customer-preference pricing 
B)  seasonal-load pricing 
C)  peak-load pricing 
D)  capacity pricing

Question 5

In a long-run, it is worthwhile to sell a product only if the selling price exceeds ________.

Accepted Answer

A)  the total of all the direct costs of the product 
B)  the total manufacturing costs of the product 
C)  the total of the fixed costs of the value chain 
D)  full cost of the product and a markup that provides an adequate return on capital 
A)  the total of all the direct costs of the product 
B)  the total manufacturing costs of the product 
C)  the total of the fixed costs of the value chain 
D)  full cost of the product and a markup that provides an adequate return on capital

Question 6

Companies must always examine their pricing ________.

Accepted Answer

A)  based on the supply of the product 
B)  based on the full cost of producing the product and price to make a profit 
C)  through the eyes of their customers and then manage costs to produce a profit 
D)  based on the GAAP cost of producing the product and then add a mark-up 
A)  based on the supply of the product 
B)  based on the full cost of producing the product and price to make a profit 
C)  through the eyes of their customers and then manage costs to produce a profit 
D)  based on the GAAP cost of producing the product and then add a mark-up

Question 7

Fluctuations in exchange rates between different countries' currencies affect costs and pricing decisions of a company.

Accepted Answer

A) True 
 B)False

Question 8

Wilde Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
 
Wilde has an annual target operating income of $920,000.
The markup percentage for setting prices as a percentage of variable manufacturing costs is ________.

Accepted Answer

A)  52.83% 
B)  89.73% 
C)  65.31% 
D)  21.17% 
A)  52.83% 
B)  89.73% 
C)  65.31% 
D)  21.17%

Question 9

One of the risks of using only the variable cost as a base may tempt managers to cut prices as long as prices are above variable cost.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is true of price bidding with the federal government?

Accepted Answer

A)  the price can only cover direct costs 
B)  the price can only cover direct costs and marketing costs 
C)  the price is based on costs that include fully allocated manufacturing and design costs but not include marketing costs 
D)  the price can include only fixed manufacturing costs and design costs but not include marketing costs 
A)  the price can only cover direct costs 
B)  the price can only cover direct costs and marketing costs 
C)  the price is based on costs that include fully allocated manufacturing and design costs but not include marketing costs 
D)  the price can include only fixed manufacturing costs and design costs but not include marketing costs

Question 11

When the price of a product does not change as a result of changes in demand, the price insensitivity to demand is called demand inelasticity.

Accepted Answer

A) True 
 B)False

Question 12

One purpose of cost allocations is to justify costs to establish a "fair" price, often required by law and government contracts.

Accepted Answer

A) True 
 B)False

Question 13

When demand for a product is very elastic and prices are increased, demand will ________.

Accepted Answer

A)  remain the same, and operating profits will increase 
B)  remain the same, and operating profits may either increase or decrease 
C)  decrease, and operating profits will decrease 
D)  decrease, and operating profits may either increase or decrease 
A)  remain the same, and operating profits will increase 
B)  remain the same, and operating profits may either increase or decrease 
C)  decrease, and operating profits will decrease 
D)  decrease, and operating profits may either increase or decrease

Question 14

A product costs $600 to manufacture and $20 to market and $10 to distribute (ship to customers.) R&D costs are allocated at $40 per unit. Based on a targeted rate of return, manager uses a mark-up of 30%. What is the prospective selling price based on a Cost-Plus pricing approach?

Accepted Answer

A)  $780 
B)  $806 
C)  $819 
D)  $871 
A)  $780 
B)  $806 
C)  $819 
D)  $871

Question 15

Which of the following choices is the practice of charging a higher price for the same product or service when demand approaches the physical limit of the capacity to produce that product or service?

Accepted Answer

A)  Price discrimination 
B)  Peak-load pricing 
C)  Demand-based pricing 
D)  Customer preference pricing 
A)  Price discrimination 
B)  Peak-load pricing 
C)  Demand-based pricing 
D)  Customer preference pricing

Question 16

As a general rule of economics, companies should only produce and sell units as long as ________.

Accepted Answer

A)  there is customer demand for the product 
B)  there is a relatively small supply of the product when compared to past operating periods 
C)  the revenue from an additional unit exceeds the cost of producing it 
D)  there is a generous supply of low-cost direct materials 
A)  there is customer demand for the product 
B)  there is a relatively small supply of the product when compared to past operating periods 
C)  the revenue from an additional unit exceeds the cost of producing it 
D)  there is a generous supply of low-cost direct materials

Question 17

Life-cycle costing is best described by which of the following?

Accepted Answer

A)  it is a method of cost planning to reduce manufacturing costs to targeted levels 
B)  it is the process of tracking and accumulating costs that are incurred within the manufacturing and distribution links of the value chain 
C)  it is the process of tacking and accumulating business function costs across the entire value chain 
D)  it is a costing system that focuses on reducing costs during the manufacturing cycle 
A)  it is a method of cost planning to reduce manufacturing costs to targeted levels 
B)  it is the process of tracking and accumulating costs that are incurred within the manufacturing and distribution links of the value chain 
C)  it is the process of tacking and accumulating business function costs across the entire value chain 
D)  it is a costing system that focuses on reducing costs during the manufacturing cycle

Question 18

Quick Connect manufactures high-tech cell phones. Quick Connect has a policy of adding a 25% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month:
 
Quick Connect Products is approached by an overseas customer to fulfill a one-time-only special order for 150 units. All cost relationships remain the same except for a one-time setup charge of $2025. No additional design, marketing, or distribution costs will be incurred. What is the minimum acceptable bid per unit on this one-time-only special order?

Accepted Answer

A)  $30.20 
B)  $173.20 
C)  $186.70 
D)  $188.50 
A)  $30.20 
B)  $173.20 
C)  $186.70 
D)  $188.50

Question 19

Marcon Tech Corp., currently sells radios for $7,000. It has costs of $5,400. A competitor is bringing a new radio to market that will sell for $6,850. Management believes it must lower the price to $6,850 to compete in the market for radios. The marketing department believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Marcon's sales are currently 1,000 radios per year.
Required:
a. What is the target cost for the new target price if target operating income is 20% of sales?
b. What is the change in operating income if marketing department is correct and only the sales price is changed?
c. What is the target cost if the company wants to maintain its same income level, and marketing department is correct in its estimation?

Accepted Answer

The answer of Marcon Tech Corp., currently sells radios for...

Question 20

Gracius Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Gracius Manufacturing has a policy of adding a 20% markup to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers:
 
What is the full cost of the product per unit for Gracius Manufacturing?

Accepted Answer

A)  $90 
B)  $140 
C)  $360 
D)  $432 
A)  $90 
B)  $140 
C)  $360 
D)  $432

Costing systems measure ________.

Which of the following statements is true about the factors that affect pricing decisions?

Roberto Inc., operates a chain of luxury hotels in the Asia-Pacific region. It charges $150 for one night stay. However when 90% of the rooms are occupied, Roberto charges a premium of 20% on room tariff for the remaining rooms. What pricing method has Roberto Inc. adopted?

In a long-run, it is worthwhile to sell a product only if the selling price exceeds ________.

Companies must always examine their pricing ________.

Fluctuations in exchange rates between different countries' currencies affect costs and pricing decisions of a company.

Wilde Corporation budgeted the following costs for the production of its one and only product for the next fiscal year: Wilde has an annual target operating income of $920,000. The markup percentage for setting prices as a percentage of variable manufacturing costs is ________.

One of the risks of using only the variable cost as a base may tempt managers to cut prices as long as prices are above variable cost.

Which of the following is true of price bidding with the federal government?

When the price of a product does not change as a result of changes in demand, the price insensitivity to demand is called demand inelasticity.

One purpose of cost allocations is to justify costs to establish a "fair" price, often required by law and government contracts.

When demand for a product is very elastic and prices are increased, demand will ________.

A product costs $600 to manufacture and $20 to market and $10 to distribute (ship to customers.) R&D costs are allocated at $40 per unit. Based on a targeted rate of return, manager uses a mark-up of 30%. What is the prospective selling price based on a Cost-Plus pricing approach?

Which of the following choices is the practice of charging a higher price for the same product or service when demand approaches the physical limit of the capacity to produce that product or service?

As a general rule of economics, companies should only produce and sell units as long as ________.

Life-cycle costing is best described by which of the following?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 13: Pricing Decisions and Cost Management

Costing systems measure ________.

Which of the following statements is true about the factors that affect pricing decisions?

Roberto Inc., operates a chain of luxury hotels in the Asia-Pacific region. It charges $150 for one night stay. However when 90% of the rooms are occupied, Roberto charges a premium of 20% on room tariff for the remaining rooms. What pricing method has Roberto Inc. adopted?

In a long-run, it is worthwhile to sell a product only if the selling price exceeds ________.

Companies must always examine their pricing ________.

Fluctuations in exchange rates between different countries' currencies affect costs and pricing decisions of a company.

Wilde Corporation budgeted the following costs for the production of its one and only product for the next fiscal year: Wilde has an annual target operating income of $920,000. The markup percentage for setting prices as a percentage of variable manufacturing costs is ________.

One of the risks of using only the variable cost as a base may tempt managers to cut prices as long as prices are above variable cost.

Which of the following is true of price bidding with the federal government?

When the price of a product does not change as a result of changes in demand, the price insensitivity to demand is called demand inelasticity.

One purpose of cost allocations is to justify costs to establish a "fair" price, often required by law and government contracts.

When demand for a product is very elastic and prices are increased, demand will ________.

A product costs $600 to manufacture and $20 to market and $10 to distribute (ship to customers.) R&D costs are allocated at $40 per unit. Based on a targeted rate of return, manager uses a mark-up of 30%. What is the prospective selling price based on a Cost-Plus pricing approach?

Which of the following choices is the practice of charging a higher price for the same product or service when demand approaches the physical limit of the capacity to produce that product or service?

As a general rule of economics, companies should only produce and sell units as long as ________.

Life-cycle costing is best described by which of the following?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters