Exam 12: Pricing and Profitability Analysis

Which type of expenses does a monopoly usually incur that are different from the other types of market structures?

Farr Company had the following information: Revenues \4 00,000 Cost of goods sold: Direct materrals \ 100,000 Direct labour 50,000 Overhead Gross profit \ 200,000 Selling and administrative expenses Operating income What is the markup based on cost of goods sold?

Which of the following markets is characterized by the following: many buyers and sellers,a homogeneous product,easy entry into and exit from the industry,and all firms are price takers?

Refer to the figure.What would be the price for a product that has a cost of $500,assuming that the markup is based on cost of goods sold?

The Robinson-Patman Act allows price discrimination under which of the following circumstances?

What is the equivalent of gross margin on a variable costing income statement?

Steele Corporation has the following information for January, February, and March: January February March Units produced 10,000 10,000 10,000 Units sold 7,000 8,500 10,500 Production costs per unit (based on 10,000 units) are as follows: Direct materials \ 12 Direct labour 8 Variable factory overhead 6 Fixed factory overhead 4 Variable selling and admin. expenses 4 Fixed selling and admin. expenses -Refer to the figure.There were no beginning inventories for January,and all units were sold for $50.Costs are stable over the three months. What is the March ending inventory for Steele Corporation using the variable costing method?

What do successful firms have to measure in addition to accounting profit?

Nordholm Construction Company builds houses.Each job requires a bid.Nordholm's bidding policy is to estimate the costs of materials,direct labour,and subcontractor's costs.These are totalled and a markup is applied to cover overhead and profit.In the coming year,Nordholm believes it will be the successful bidder on ten jobs with the following total revenues and costs: Revenues \ 648,000 Materials \ 200,000 Direct labour 250,000 Subcontractors 150,000 600,000 Residual \4 8,000 The residual will cover overhead and profits. a.What is the markup percentage on total direct costs? b.Suppose Nordholm is asked to bid on a job with estimated direct costs of $55,000.What is the bid? If the customer complains that the profit seems high,how might Nordholm counter that?

What is the impact of expenses related to specific market structure types?

By what difference is the sales price variance created?

Ellie Manufacturing Company produces three products: A,B,and C.The income statement for the current year is as follows: Sales \2 00,000 Less: Variable expenses Contribution margin \7 3,000 Less fixed expenses: Manufacturing \2 0,000 Selling and administrative Net income The sales,contribution margin ratios,and direct fixed expenses for the three types of products are as follows: A E C Sales \ 60,000 \ 40,000 \ 100,000 Contribution margin ratio 35\% 30\% 40\% Direct fixed expenses of products \ 8,000 \ 5,000 \ 4,000 Prepare income statements segmented by products.Include a column for the entire firm in the statement.

Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in the current year when 30,000 were projected. Sales for the following year look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. Option Four: Cut the price to $60 per game and possibly sell 20,000 units. -Refer to the figure.Which option is preferred?

Which of the following is NOT a limitation of profit management?

Farr Company had the following information: Revenues \4 00,000 Cost of goods sold: Direct materrals \ 100,000 Direct labour 50,000 Overhead Gross profit \ 200,000 Selling and administrative expenses Operating income What is the markup based on prime costs?

Which of the following is NOT an example of a market structure?

Ramon Company reported the following units of production and sales for June and July: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Units }$ Month Produced Sold June 100,000 90,000 July 100,000 105,000 Net income under absorption costing for June was $40,000; net income under variable costing for July was $50,000.Fixed manufacturing costs were $600,000 for each month. How much was net income for June using variable costing?

The following information pertains to three different products being sold by Leone Company: \ 15.00 \ 14.25 2,000 2,200 20.00 18.50 3,000 3,300 25.00 27.50 4.000 3.600 a.Determine the price elasticity of demand for each of the products. b.Which products have an elastic demand? Inelastic demand?

The following information pertains to Stark Corporation: Beginning inventory 0 units Ending inventory 5,000 units Direct labour per unit \ 20 Direct materials per unit 16 Variable overhead per unit 4 Fixed overhead per unit 10 Variable selling costs per unit 12 Fixed selling costs per unit 16 -Refer to the figure.How would absorption costing net income compare to the variable costing net income?

Discuss the limitation of profit measurement.