Exam 13: Pricing Decisions and Cost Management

To comply with antitrust laws, a company must not engage in predatory pricing, dumping, or collusive pricing which lessen competition, put another company at a competitive disadvantage, or harm consumers.

Which of the following is true of target costing?

What are the five steps that are followed while implementing target pricing and target costing?

Quick Connect manufactures high-tech cell phones. Quick Connect has a policy of adding a 20% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month: For long-run pricing of the cell phones, what price will most likely be used by Quick Connect?

Sales of Granite City Products Inc. have been on a steady decline for the last 12 months. A market research study conducted revealed that the product of Granite City Products Inc. can be sold only for $480 as opposed to the current market price charged of $580 per unit. Granite City Products Inc. has decided to revise its sales price to $480. The annual sales target volume of the product after price revision is 280 units. Granite City Products Inc. wants to earn 30% on its sales amount. What is the target cost per unit?

An example of why a manager would perform cost allocations for economic decisions would be to cost inventories for reporting to the tax authorities.

For long-run pricing decisions, using stable prices has the advantage of ________.

The target rate of return on investment the percentage used to markup the cost to an acceptable selling price.

The amount of a markup percentage that customers are willing to pay is usually higher when which of the following conditions exist?

A company is said to be involved in predatory pricing even when it is compelled to sell its products are a price below the average variable cost because of pricing of the competitor.

Which of the following is an objective of value engineering?

Which of the following scenarios is an example of predatory pricing?

Market research can be an effective tool in understanding the features customers value.

Which of the following is an example of price discrimination?

Place the following steps for the implementation of target costing in order: A = Derive a target cost B = Develop a target price C = Perform value engineering D = Determine target operating income

Making design decisions is an example of managing costs:

Crimpson Corp., a California-based company is selling its products for $21. Its average variable costs is $23 and the average selling price of its competitors is $26. This is an example of ________.

Which of the following is an example of value added cost?

Which of the following is regarded as a purpose of cost allocation?

Jamal, Kareem, Rashid and Associates are in the process of evaluating its new client services for the business consulting division. -Estate Planning, a new service, incurred $190,000 in development costs and employee training. -The direct costs of providing this service, which is all labor, averages $29 per hour. -Other costs for this service are estimated at $410,000 per year. -The current program for estate planning is expected to last for two years. At that time, a new law will be in place that will require new operating guidelines for the tax consulting. -Customer service expenses average $104 per client, with each job lasting an average of 450 hours. The current staff expects to bill 67,500 hours for each of the two years the program is in effect. Billing averages $49 per hour. What is the estimated life-cycle operating income for the first two years?