Question 1

Which of the following is true of target pricing?

Accepted Answer

A)  it is used for short-term pricing decisions. 
B)  it is one form of cost-based pricing. 
C)  a price is an estimate of customers' perceived value of the product. 
D)  a price is calculated by adding a markup component to the cost base. 
A)  it is used for short-term pricing decisions. 
B)  it is one form of cost-based pricing. 
C)  a price is an estimate of customers' perceived value of the product. 
D)  a price is calculated by adding a markup component to the cost base.

Question 2

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:
 
If the European customer wanted a long-term commitment, and not a one-time-only special order, for supplying this product, calculate the most likely price to be quoted assuming the markup remains the same?

Accepted Answer

A)  $110 
B)  $250 
C)  $300 
D)  $190 
A)  $110 
B)  $250 
C)  $300 
D)  $190

Question 3

For a company operating in a perfectly competitive market, cost information affects the pricing decisions of the company.

Accepted Answer

A) True 
 B)False

Question 4

Cost allocation is not required to cost inventories for reporting to external parties.

Accepted Answer

A) True 
 B)False

Question 5

Value engineering seeks to reduce value-added costs as well as nonvalue-added costs.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is a cost that, if eliminated, would reduce the actual or perceived value or utility (usefulness) customers experience from using the product or service?

Accepted Answer

A)  Non-value-added cost 
B)  Discretionary cost 
C)  Value-added cost 
D)  Committed cost 
A)  Non-value-added cost 
B)  Discretionary cost 
C)  Value-added cost 
D)  Committed cost

Question 7

A full-cost formula for pricing does requires that the management accountant performs a detailed analysis of cost-behavior patterns to separate product costs into variable and fixed components.

Accepted Answer

A) True 
 B)False

Question 8

Toy City Inc., manufactures a product and is considering raising the price by $40 a unit for the coming year. With a $40 price increase, demand is expected to fall by 2800 units.
 
Bright Inc., has a capacity to produce 28,800 units. Due to an increase in the electricity costs, there is a sudden spike in demand by 2800 units. If the company adopts peak-load pricing policy and charges a premium of 20% over the current sales price, what is the total contribution on the sale of additional units?

Accepted Answer

A)  $257,600 
B)  $280,000 
C)  $537,600 
D)  $526,400 
A)  $257,600 
B)  $280,000 
C)  $537,600 
D)  $526,400

Question 9

When making pricing decisions managers should include fixed cost per unit in the cost because ________.

Accepted Answer

A)  it leads to reporting higher operating income for the period 
B)  it allows managers to report positive contribution as long as prices are above variable costs 
C)  in the long run, the price of a product must exceed the full cost of the product 
D)  it requires the management accountant to perform a detailed analysis of cost-behavior patterns to separate product costs into variable and fixed components 
A)  it leads to reporting higher operating income for the period 
B)  it allows managers to report positive contribution as long as prices are above variable costs 
C)  in the long run, the price of a product must exceed the full cost of the product 
D)  it requires the management accountant to perform a detailed analysis of cost-behavior patterns to separate product costs into variable and fixed components

Question 10

Jackson Company has budgeted sales of $810,000 with the following budgeted costs:
   
Compute the average markup percentage for setting prices as a percentage of:
a.Total manufacturing costs
b.The variable cost of the product
c.The full cost of the product
d.Variable manufacturing costs

Accepted Answer

a.$168,000 + $140,000 + $98,000 + $108,0

Question 11

Sail Safe currently sells motor boats for $60,000. It has costs of $46,500. A competitor is bringing a new motor boat to the market that will sell for $55,000. Management believes it must lower the price to $55,000 to compete in the market for motor boats. The marketing department believes that the new price will cause sales to increase by 12.5%, even with a new competitor in the market. Sail Safe's sales are currently 2,000 motor boats per year. 3
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?

Accepted Answer

The answer of Sail Safe currently sells motor boats for...

Question 12

Companies operating in competitive markets should ideally use cost-plus approach to pricing.

Accepted Answer

A) True 
 B)False

Question 13

When is a company said to be engaged in predatory pricing? What are the primary conditions to be satisfied to prove predatory pricing?

Accepted Answer

A company is said to be engaged in preda

Question 14

Which of the following is true of locked-in costs?

Accepted Answer

A)  Locked-in costs are the same as sunk costs. 
B)  Locked-in costs are always fixed costs. 
C)  Locked-in costs are incurred costs. 
D)  Locked-in costs are also called designed-in costs. 
A)  Locked-in costs are the same as sunk costs. 
B)  Locked-in costs are always fixed costs. 
C)  Locked-in costs are incurred costs. 
D)  Locked-in costs are also called designed-in costs.

Question 15

When materials and supplies are used in a production facility to assemble and finish a product that will be sold to customers, the usage of the materials and supplies is described as:

Accepted Answer

A)  Cost incurrence 
B)  Locked-in cost 
C)  Opportunity cost 
D)  Designed-in cost 
A)  Cost incurrence 
B)  Locked-in cost 
C)  Opportunity cost 
D)  Designed-in cost

Question 16

Franklin Company is in the process of evaluating a new part using the following information.
-Part SLC2002 has one production run each month, each with $18,000 in setup costs.
-Part SLC2002 incurred $40,000 in development costs and is expected to be produced over the next three years.
-Direct costs of producing Part SLC2002 are $56,000 per run of 24,000 parts each.
-Indirect manufacturing costs charged to each run are $88,000.
-Destination charges for each run average $15,000.
-Part SLC2002 is selling for $14.00 in the United States and $25 in all other countries. Sales are one-third domestic and two-thirds exported.
-Sales units equal production units each year.
Required:
a.What are the estimated life-cycle revenues?
b.What is the estimated life-cycle operating income for the first year?

Accepted Answer

The answer of Franklin Company is in the process of...

Question 17

Managing environmental costs is an example of life-cycle costing and value engineering.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following are true regarding long-run pricing decisions?

Accepted Answer

A)  they result in maximizing return on investment 
B)  they include adjusting product mix in a competitive environment 
C)  the price needs to be sufficient enough to break-even 
D)  use prices that include a reasonable return on invested capital 
A)  they result in maximizing return on investment 
B)  they include adjusting product mix in a competitive environment 
C)  the price needs to be sufficient enough to break-even 
D)  use prices that include a reasonable return on invested capital

Question 19

Golden Generator Supply is approached by Mr. Stephen, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Golden Generator Supply has excess capacity. The following per unit data apply for sales to regular customers:
 
For Golden Generator Supply, what is the minimum acceptable price of this one-time-only special order?

Accepted Answer

A)  $1930.00 
B)  $2140.00 
C)  $2290.00 
D)  $2748.00 
A)  $1930.00 
B)  $2140.00 
C)  $2290.00 
D)  $2748.00

Question 20

Customer life-cycle costs , because they are only budgeted items, do not influence the prices a company can charge for its products.

Accepted Answer

A) True 
 B)False

Which of the following is true of target pricing?

For a company operating in a perfectly competitive market, cost information affects the pricing decisions of the company.

Cost allocation is not required to cost inventories for reporting to external parties.

Value engineering seeks to reduce value-added costs as well as nonvalue-added costs.

Which of the following is a cost that, if eliminated, would reduce the actual or perceived value or utility (usefulness) customers experience from using the product or service?

A full-cost formula for pricing does requires that the management accountant performs a detailed analysis of cost-behavior patterns to separate product costs into variable and fixed components.

When making pricing decisions managers should include fixed cost per unit in the cost because ________.

Jackson Company has budgeted sales of $810,000 with the following budgeted costs: Compute the average markup percentage for setting prices as a percentage of: a.Total manufacturing costs b.The variable cost of the product c.The full cost of the product d.Variable manufacturing costs

Companies operating in competitive markets should ideally use cost-plus approach to pricing.

When is a company said to be engaged in predatory pricing? What are the primary conditions to be satisfied to prove predatory pricing?

Which of the following is true of locked-in costs?

When materials and supplies are used in a production facility to assemble and finish a product that will be sold to customers, the usage of the materials and supplies is described as:

Managing environmental costs is an example of life-cycle costing and value engineering.

Which of the following are true regarding long-run pricing decisions?

Customer life-cycle costs , because they are only budgeted items, do not influence the prices a company can charge for its products.

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

Which of the following is true of target pricing?

For a company operating in a perfectly competitive market, cost information affects the pricing decisions of the company.

Cost allocation is not required to cost inventories for reporting to external parties.

Value engineering seeks to reduce value-added costs as well as nonvalue-added costs.

Which of the following is a cost that, if eliminated, would reduce the actual or perceived value or utility (usefulness) customers experience from using the product or service?

A full-cost formula for pricing does requires that the management accountant performs a detailed analysis of cost-behavior patterns to separate product costs into variable and fixed components.

When making pricing decisions managers should include fixed cost per unit in the cost because ________.

Jackson Company has budgeted sales of $810,000 with the following budgeted costs: Compute the average markup percentage for setting prices as a percentage of: a.Total manufacturing costs b.The variable cost of the product c.The full cost of the product d.Variable manufacturing costs

Companies operating in competitive markets should ideally use cost-plus approach to pricing.

When is a company said to be engaged in predatory pricing? What are the primary conditions to be satisfied to prove predatory pricing?

Which of the following is true of locked-in costs?

When materials and supplies are used in a production facility to assemble and finish a product that will be sold to customers, the usage of the materials and supplies is described as:

Managing environmental costs is an example of life-cycle costing and value engineering.

Which of the following are true regarding long-run pricing decisions?

Customer life-cycle costs , because they are only budgeted items, do not influence the prices a company can charge for its products.

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