Question 1

What are the undesirable effects of value engineering and target costing? How can these be reduced?

Accepted Answer

Unless managed properly, value engineeri

Question 2

Value engineering entails improvements in product designs, and changes in materials specifications.

Accepted Answer

A) True 
 B)False

Question 3

In a perfectly competitive market, which of the following is a primary factor influencing pricing decisions?

Accepted Answer

A)  cost of production 
B)  availability of raw materials in the market 
C)  information on competitor's cost structure 
D)  value customers place on product 
A)  cost of production 
B)  availability of raw materials in the market 
C)  information on competitor's cost structure 
D)  value customers place on product

Question 4

Life-cycle budgeting estimates the costs and revenues attributed to a product from its initial R&D through production of a prototype product.

Accepted Answer

A) True 
 B)False

Question 5

After conducting a market research study, Magnificent Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $240. The annual target sales volume for interior doors is 21,000. Magnificent has target operating income of 20% of sales.
What is the target cost?

Accepted Answer

A)  $6,048,000 
B)  $5,040,000 
C)  $4,032,000 
D)  $1,008,000 
A)  $6,048,000 
B)  $5,040,000 
C)  $4,032,000 
D)  $1,008,000

Question 6

The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced at a low enough cost to provide adequate operating income is referred to as ________.

Accepted Answer

A)  cost-plus pricing 
B)  target costing 
C)  kaizen costing 
D)  full costing 
A)  cost-plus pricing 
B)  target costing 
C)  kaizen costing 
D)  full costing

Question 7

After conducting a market research study, Magnificent Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $260. The annual target sales volume for interior doors is 20,000. Magnificent has target operating income of 40% of sales.
What is the target cost for each interior door?

Accepted Answer

A)  $364 
B)  $260 
C)  $156 
D)  $104 
A)  $364 
B)  $260 
C)  $156 
D)  $104

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 total manufacturing costs is ________.

Accepted Answer

A)  52.8% 
B)  78.5% 
C)  214.2% 
D)  41.7% 
A)  52.8% 
B)  78.5% 
C)  214.2% 
D)  41.7%

Question 9

Which of the following is the best description of price discrimination?

Accepted Answer

A)  setting different prices for different products 
B)  charging different prices for quantity amounts 
C)  using variable costing for some products and full costing for other products when setting prices 
D)  charging different prices to different customers or clients for the same products or services 
A)  setting different prices for different products 
B)  charging different prices for quantity amounts 
C)  using variable costing for some products and full costing for other products when setting prices 
D)  charging different prices to different customers or clients for the same products or services

Question 10

In case of pricing for special orders, managers include all future costs, variable costs, and costs that are fixed in the short run.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following identifies an estimated price customers are willing to pay and then computes the cost to be achieved to earn the desired profit.

Accepted Answer

A)  Cost-plus pricing 
B)  Target costing 
C)  Kaizen costing 
D)  Peak-load costing 
A)  Cost-plus pricing 
B)  Target costing 
C)  Kaizen costing 
D)  Peak-load costing

Question 12

Samuels Company is considering pricing its 10,000-gallon petroleum tanks using either variable manufacturing or full product costs as the base. The variable cost base provides a prospective price of $6,000 and the full cost base provides a prospective price of $6,100. Which of the following explains the difference in the two prices?

Accepted Answer

A)  the estimated amount of profit 
B)  the variable cost base estimates fixed costs in the markup percentage while the full cost base includes an amount for fixed costs 
C)  there is no explanation since this is known as price discrimination 
D)  the difference is caused by the inability to estimate fixed cost per unit with any degree of reliability 
A)  the estimated amount of profit 
B)  the variable cost base estimates fixed costs in the markup percentage while the full cost base includes an amount for fixed costs 
C)  there is no explanation since this is known as price discrimination 
D)  the difference is caused by the inability to estimate fixed cost per unit with any degree of reliability

Question 13

Short-run prices should at least recover ________.

Accepted Answer

A)  full cost of producing a product 
B)  fixed manufacturing overhead 
C)  variable cost of producing a product 
D)  variable and fixed manufacturing overhead 
A)  full cost of producing a product 
B)  fixed manufacturing overhead 
C)  variable cost of producing a product 
D)  variable and fixed manufacturing overhead

Question 14

A hotel in Orlando, Florida, experiences peak periods and slower times. How should prices be adjusted during peak periods? During slow times? Why?

Accepted Answer

During peak periods the hotel can justif

Question 15

Which of the following best describes customer life-cycle costs?

Accepted Answer

A)  costs incurred by the selling company to satisfy the customer. 
B)  costs to the customers for buying and using a product. 
C)  same as the selling life-cycle prices. 
D)  replacement costs of using a product or service. 
A)  costs incurred by the selling company to satisfy the customer. 
B)  costs to the customers for buying and using a product. 
C)  same as the selling life-cycle prices. 
D)  replacement costs of using a product or service.

Question 16

Velim Electronics manufactures electric shavers and is considering decreasing the price by $3 a unit for the coming year. With a $3 price decrease, the unit demand is expected to increase by 25%, and a high volume materials discount is expected to decrease the variable costs per unit by $2 per unit.
 
Would you recommend the $3 price decrease?

Accepted Answer

A)  Yes, because demand decreases. 
B)  No, because the selling price decreases. 
C)  Yes, because operating income increases. 
D)  No, because contribution margin per unit increases. 
A)  Yes, because demand decreases. 
B)  No, because the selling price decreases. 
C)  Yes, because operating income increases. 
D)  No, because contribution margin per unit increases.

Question 17

What is the primary reason a firm would adopt target costing?

Accepted Answer

The primary reason a firm would adopt ta

Question 18

Monopolists can charge prices without limitations as there is no competition for the product or service the monopolist provides.

Accepted Answer

A) True 
 B)False

Question 19

Rework is an example of a value-added cost.

Accepted Answer

A) True 
 B)False

Question 20

Twenty Technologies, currently sells 17" monitors for $270. It has costs of $230. A competitor is bringing a new 17" monitor to market that will sell for $245. Management believes it must lower the price to $245 to compete in the market for 17" monitors. Twenty Technologies believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Twenty Technologies's sales are currently 5200 monitors per year.
What is the change in operating income if marketing manager is correct and only the sales price is changed?

Accepted Answer

A)  $130,000 
B)  $122,200 
C)  ($122,200) 
D)  ($130,000) 
A)  $130,000 
B)  $122,200 
C)  ($122,200) 
D)  ($130,000)

What are the undesirable effects of value engineering and target costing? How can these be reduced?

Value engineering entails improvements in product designs, and changes in materials specifications.

In a perfectly competitive market, which of the following is a primary factor influencing pricing decisions?

Life-cycle budgeting estimates the costs and revenues attributed to a product from its initial R&D through production of a prototype product.

The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced at a low enough cost to provide adequate operating income is referred to as ________.

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 total manufacturing costs is ________.

Which of the following is the best description of price discrimination?

In case of pricing for special orders, managers include all future costs, variable costs, and costs that are fixed in the short run.

Which of the following identifies an estimated price customers are willing to pay and then computes the cost to be achieved to earn the desired profit.

Short-run prices should at least recover ________.

A hotel in Orlando, Florida, experiences peak periods and slower times. How should prices be adjusted during peak periods? During slow times? Why?

Which of the following best describes customer life-cycle costs?

What is the primary reason a firm would adopt target costing?

Monopolists can charge prices without limitations as there is no competition for the product or service the monopolist provides.

Rework is an example of a value-added cost.

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

What are the undesirable effects of value engineering and target costing? How can these be reduced?

Value engineering entails improvements in product designs, and changes in materials specifications.

In a perfectly competitive market, which of the following is a primary factor influencing pricing decisions?

Life-cycle budgeting estimates the costs and revenues attributed to a product from its initial R&D through production of a prototype product.

The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced at a low enough cost to provide adequate operating income is referred to as ________.

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 total manufacturing costs is ________.

Which of the following is the best description of price discrimination?

In case of pricing for special orders, managers include all future costs, variable costs, and costs that are fixed in the short run.

Which of the following identifies an estimated price customers are willing to pay and then computes the cost to be achieved to earn the desired profit.

Short-run prices should at least recover ________.

A hotel in Orlando, Florida, experiences peak periods and slower times. How should prices be adjusted during peak periods? During slow times? Why?

Which of the following best describes customer life-cycle costs?

What is the primary reason a firm would adopt target costing?

Monopolists can charge prices without limitations as there is no competition for the product or service the monopolist provides.

Rework is an example of a value-added cost.

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