Question 1

Managers need to understand customers because ________.

Accepted Answer

A)  they are the key in influencing the board decisions and help in formulating policies with the suppliers 
B)  they guide the managers to formulate pricing policies 
C)  they are more knowledgeable as they easy access to price and other information online 
D)  they influence the costing decisions of the product 
A)  they are the key in influencing the board decisions and help in formulating policies with the suppliers 
B)  they guide the managers to formulate pricing policies 
C)  they are more knowledgeable as they easy access to price and other information online 
D)  they influence the costing decisions of the product

Question 2

A company's invested capital is $13,000,000 and management has determined that the target rate of return on investment is 10%. Last year, the company produced 131,313 units and this year expects to units sales to be 10% above last year. The cost of the product is estimated to be $13 per unit. What is the target operating income per unit? (Round any intermediary calculations to the nearest unit and your final answer to the nearest cent.)

Accepted Answer

A)  $9.00 
B)  $9.90 
C)  $13.00 
D)  $6.50 
A)  $9.00 
B)  $9.90 
C)  $13.00 
D)  $6.50

Question 3

What factors may influence the level of markups?

Accepted Answer

Factors affecting the level of markups i

Question 4

Knowledge Transfer Associates is in the process of evaluating its new client services for the business systems consulting division.
-Server Planning, a new service, incurred $270,000 in development costs.
-The direct costs of providing the service, which is all labor, averages $40 per hour.
-Other costs for this service are estimated at $310,000 per year.
-The current program for server planning is expected to last for two years. At that time, expected new operating systems are likely to make the service non viable.
-Customer service expenses average $300 per client, with each job lasting an average of 60 hours. The current staff expects to bill 22,800 hours for each of the two years the program is in effect. Billing averages $100 per hour.
What is the estimated life-cycle operating income for both years combined?

Accepted Answer

A)  $944,000 
B)  $1,618,000 
C)  ($674,000) 
D)  $1,348,000 
A)  $944,000 
B)  $1,618,000 
C)  ($674,000) 
D)  $1,348,000

Question 5

Reverse engineering can be used to analyze competitors' products to determine product designs and materials and to understand the technologies competitors use.

Accepted Answer

A) True 
 B)False

Question 6

In markets with little or no competition, the key factor affecting price is the cost of production to the company.

Accepted Answer

A) True 
 B)False

Question 7

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 $440 as opposed to the current market price charged of $540 per unit. Granite City Products Inc. has decided to revise its sales price to $440. The annual sales target volume of the product after price revision is 260 units. Granite City Products Inc. wants to earn 30% on its sales amount.
What are the target sales revenues?

Accepted Answer

A)  $148,720 
B)  $114,400 
C)  $80,080 
D)  $42,120 
A)  $148,720 
B)  $114,400 
C)  $80,080 
D)  $42,120

Question 8

Predatory pricing occurs when companies in an industry conspire in their pricing and production decisions to achieve a price above the competitive price and so restrain trade.

Accepted Answer

A) True 
 B)False

Question 9

A locked-in cost is a(n) ________.

Accepted Answer

A)  opportunity cost that is fixed in the short run 
B)  cost that can be changed in the short run 
C)  cost that has not yet been incurred, but based on decisions that have already been made, will be incurred in the future 
D)  cost that has been incurred, but based on decisions that have already been made, will be not incurred in the future 
A)  opportunity cost that is fixed in the short run 
B)  cost that can be changed in the short run 
C)  cost that has not yet been incurred, but based on decisions that have already been made, will be incurred in the future 
D)  cost that has been incurred, but based on decisions that have already been made, will be not incurred in the future

Question 10

Bouchard Company manufactures a product that currently has a full cost of $700. Its target operating income per unit is $50 and management's budgets assume that same target operating income per unit for the foreseeable future. To stay competitive, Bouchard management believes it must cut its price by 15%. What will be its new target price?

Accepted Answer

A)  $700 
B)  $587.50 
C)  $637.50 
D)  $50 
A)  $700 
B)  $587.50 
C)  $637.50 
D)  $50

Question 11

In relation to target costing, which of the following best describes target cost per unit?

Accepted Answer

A)  It is the targeted cost of producing one unit to achieve the current year's budgeted profit. 
B)  It is the estimated long-run cost of a product that enables the company to achieve its target operating income. 
C)  It is the cost that can be achieved by ensuring that the company produced its products at maximum efficiency. 
D)  It is the budgeted cost that the company estimates in producing a unit in the current budget period. 
A)  It is the targeted cost of producing one unit to achieve the current year's budgeted profit. 
B)  It is the estimated long-run cost of a product that enables the company to achieve its target operating income. 
C)  It is the cost that can be achieved by ensuring that the company produced its products at maximum efficiency. 
D)  It is the budgeted cost that the company estimates in producing a unit in the current budget period.

Question 12

Which f the following methods focuses on reducing costs during the manufacturing stage?

Accepted Answer

A)  Target costing 
B)  Kaizen costing 
C)  Cost-plus pricing 
D)  Life-cycle costing 
A)  Target costing 
B)  Kaizen costing 
C)  Cost-plus pricing 
D)  Life-cycle costing

Question 13

An understanding of life-cycle costs can lead to which of the following?

Accepted Answer

A)  additional costs during the manufacturing cycle 
B)  less need for evaluation of the competition 
C)  the accumulation of information for strategically evaluating pricing decisions 
D)  mutually beneficial relationships between buyers and sellers 
A)  additional costs during the manufacturing cycle 
B)  less need for evaluation of the competition 
C)  the accumulation of information for strategically evaluating pricing decisions 
D)  mutually beneficial relationships between buyers and sellers

Question 14

Twenty Technologies, currently sells 17" monitors for $280. It has costs of $220. A competitor is bringing a new 17" monitor to market that will sell for $230. Management believes it must lower the price to $230 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' sales are currently 5100 monitors per year.
What is the target cost if the target operating income is 25% of sales?

Accepted Answer

A)  $230.00 
B)  $210.00 
C)  $172.50 
D)  $165.00 
A)  $230.00 
B)  $210.00 
C)  $172.50 
D)  $165.00

Question 15

Jack's Back Porch manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $300 per table, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Jack's Back Porch's policy to add a 70% markup to full costs.
Jack's Back Porch is invited to bid on a one-time-only special order to supply 150 rustic tables. What is the lowest price Jack's Back Porch should bid on this special order?

Accepted Answer

A)  $45,000 
B)  $18,000 
C)  $27,000 
D)  $76,500 
A)  $45,000 
B)  $18,000 
C)  $27,000 
D)  $76,500

Question 16

To prove predatory pricing, one of conditions established by the U.S. Supreme Court is that the company should be charging a price below 60% of its total costs.

Accepted Answer

A) True 
 B)False

Question 17

A value-added cost is a cost that, if eliminated,would increase the actual or perceived value or utility (usefulness) customers experience from using the product or service.

Accepted Answer

A) True 
 B)False

Question 18

When the firm uses the target-costing approach to pricing, the target cost per unit is the difference between the per unit target price and the per unit target ________.

Accepted Answer

A)  contribution margin 
B)  operating income 
C)  cost of goods sold 
D)  gross margin 
A)  contribution margin 
B)  operating income 
C)  cost of goods sold 
D)  gross margin

Question 19

Cool Air Inc., manufactures single room sized air conditioners. The cost accounting system estimates manufacturing costs to be $230 per air conditioner, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Cool Air Inc.'s policy to add a 30% markup to full costs.
Cool Air Inc., is invited to bid on a one-time-only special order to supply 110 air conditioners. What is the lowest price Cool Air Inc. should bid on this special order?

Accepted Answer

A)  $15,180 
B)  $25,300 
C)  $35,420 
D)  $32,890 
A)  $15,180 
B)  $25,300 
C)  $35,420 
D)  $32,890

Question 20

Predatory pricing is a type of price discrimination that ________.

Accepted Answer

A)  allows prices to be cut to the level of variable costs 
B)  is required when a company declares bankruptcy so that it can sell its remaining goods quickly 
C)  is used in the food industry for perishable goods 
D)  deliberately sets prices very low, sometimes even below costs, to minimize competition 
A)  allows prices to be cut to the level of variable costs 
B)  is required when a company declares bankruptcy so that it can sell its remaining goods quickly 
C)  is used in the food industry for perishable goods 
D)  deliberately sets prices very low, sometimes even below costs, to minimize competition

Managers need to understand customers because ________.

What factors may influence the level of markups?

Reverse engineering can be used to analyze competitors' products to determine product designs and materials and to understand the technologies competitors use.

In markets with little or no competition, the key factor affecting price is the cost of production to the company.

Predatory pricing occurs when companies in an industry conspire in their pricing and production decisions to achieve a price above the competitive price and so restrain trade.

A locked-in cost is a(n) ________.

In relation to target costing, which of the following best describes target cost per unit?

Which f the following methods focuses on reducing costs during the manufacturing stage?

An understanding of life-cycle costs can lead to which of the following?

To prove predatory pricing, one of conditions established by the U.S. Supreme Court is that the company should be charging a price below 60% of its total costs.

A value-added cost is a cost that, if eliminated,would increase the actual or perceived value or utility (usefulness) customers experience from using the product or service.

When the firm uses the target-costing approach to pricing, the target cost per unit is the difference between the per unit target price and the per unit target ________.

Predatory pricing is a type of price discrimination that ________.

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

Managers need to understand customers because ________.

What factors may influence the level of markups?

Reverse engineering can be used to analyze competitors' products to determine product designs and materials and to understand the technologies competitors use.

In markets with little or no competition, the key factor affecting price is the cost of production to the company.

Predatory pricing occurs when companies in an industry conspire in their pricing and production decisions to achieve a price above the competitive price and so restrain trade.

A locked-in cost is a(n) ________.

In relation to target costing, which of the following best describes target cost per unit?

Which f the following methods focuses on reducing costs during the manufacturing stage?

An understanding of life-cycle costs can lead to which of the following?

To prove predatory pricing, one of conditions established by the U.S. Supreme Court is that the company should be charging a price below 60% of its total costs.

A value-added cost is a cost that, if eliminated,would increase the actual or perceived value or utility (usefulness) customers experience from using the product or service.

When the firm uses the target-costing approach to pricing, the target cost per unit is the difference between the per unit target price and the per unit target ________.

Predatory pricing is a type of price discrimination that ________.

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