Question 1

For pricing decisions, full product costs:

Accepted Answer

A) include all costs that are traceable to the product 
B) include all manufacturing and selling costs 
C) include all direct costs plus an appropriate allocation of the indirect costs of all business functions 
D) allow for the highest possible product prices 
A) include all costs that are traceable to the product 
B) include all manufacturing and selling costs 
C) include all direct costs plus an appropriate allocation of the indirect costs of all business functions 
D) allow for the highest possible product prices

Question 2

Cost bases that include fewer costs also have lower markups.

Accepted Answer

A) True 
 B)False

Question 3

Price discrimination laws apply only to manufacturers.

Accepted Answer

A) True 
 B)False

Question 4

Nancy Company has budgeted sales of $300,000 with the following budgeted costs:
   Compute the average markup percentage for setting prices as a percentage of:
a. The full cost of the product
b. The variable cost of the product
c. Variable manufacturing costs
d. Total manufacturing costs

Accepted Answer

a. $60,000 + $40,000 + $30,000 + $50,000

Question 5

Answer the following questions using the information below:
Gerry's Generator Supply is approached by Mr. Sandman, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Gerry's Generator Supply has excess capacity. The following per unit data apply for sales to regular customers:
  
-Before accepting this one-time-only special order, Gerry's Generators wants to know how much profit would be made on the order:

Accepted Answer

A) $2000 
B) Loss of $150 
C) $0 
D) $430 
A) $2000 
B) Loss of $150 
C) $0 
D) $430

Question 6

Relevant costs for pricing decisions include manufacturing costs, but NOT costs from other value-chain functions.

Accepted Answer

A) True 
 B)False

Question 7

Price discrimination is the practice of charging different customers different prices for the same product or service.

Accepted Answer

A) True 
 B)False

Question 8

Answer the following questions using the information below:
Bicker, Inc., is in the process of evaluating a new product using the following information:
  
-What is the estimated life-cycle operating income for the first year?

Accepted Answer

A) $18,000 
B) $20,000 
C) $48,000 
D) $119,000 
A) $18,000 
B) $20,000 
C) $48,000 
D) $119,000

Question 9

Answer the following questions using the information below:
Gerry's Generator Supply is approached by Mr. Sandman, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Gerry's Generator Supply has excess capacity. The following per unit data apply for sales to regular customers:
  
-If Mr. Sandman wanted a long-term commitment for supplying this product, what price would most likely be quoted to him?

Accepted Answer

A) $2,000 
B) $2,150 
C) $2,580 
D) $2,800 
A) $2,000 
B) $2,150 
C) $2,580 
D) $2,800

Question 10

Target pricing:

Accepted Answer

A) is used for short-term pricing decisions 
B) is one form of cost-based pricing 
C) estimates are based on customers' perceived value of the product 
D) relevant costs are all variable costs 
A) is used for short-term pricing decisions 
B) is one form of cost-based pricing 
C) estimates are based on customers' perceived value of the product 
D) relevant costs are all variable costs

Question 11

When prices are set in a competitive marketplace, product costs are the most important influence on pricing decisions.

Accepted Answer

A) True 
 B)False

Question 12

A firm using product life-cycle reporting will have a calendar-based focus for this report.

Accepted Answer

A) True 
 B)False

Question 13

Markups tend to be higher in more competitive markets.

Accepted Answer

A) True 
 B)False

Question 14

Kaizen costing focuses on improving productivity and eliminating waste through continuous improvements.

Accepted Answer

A) True 
 B)False

Question 15

Relevant costs for pricing a special order include:

Accepted Answer

A) existing fixed manufacturing overhead 
B) nonmanufacturing costs that will not change even if the special order is accepted 
C) additional setup costs for the special order 
D) All of these answers are correct. 
A) existing fixed manufacturing overhead 
B) nonmanufacturing costs that will not change even if the special order is accepted 
C) additional setup costs for the special order 
D) All of these answers are correct.

Question 16

A full-cost base rather than a variable-cost base is a better guide for discounting decisions that may affect long-term customers.

Accepted Answer

A) True 
 B)False

Question 17

A price-bidding decision for a one-time-only special order includes an analysis of all:

Accepted Answer

A) manufacturing costs 
B) cost drivers related to the product 
C) direct and indirect variable costs of each function in the value chain 
D) fixed manufacturing costs 
A) manufacturing costs 
B) cost drivers related to the product 
C) direct and indirect variable costs of each function in the value chain 
D) fixed manufacturing costs

Question 18

Companies that operate in non competitive environments offering products or services that differ from each other use a market-based approach when making their long-run pricing decisions.

Accepted Answer

A) True 
 B)False

Question 19

Answer the following questions using the information below:
Oscar Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
   Oscar has an annual target operating income of $900,000.
-The markup percentage for setting prices as a percentage of variable manufacturing costs is:

Accepted Answer

A) 54% 
B) 87% 
C) 169% 
D) 122% 
A) 54% 
B) 87% 
C) 169% 
D) 122%

Question 20

Value engineering can be used to make cost improvements to meet a target cost.

Accepted Answer

A) True 
 B)False

For pricing decisions, full product costs:

Cost bases that include fewer costs also have lower markups.

Price discrimination laws apply only to manufacturers.

Nancy Company has budgeted sales of $300,000 with the following budgeted costs: Compute the average markup percentage for setting prices as a percentage of: a. The full cost of the product b. The variable cost of the product c. Variable manufacturing costs d. Total manufacturing costs

Relevant costs for pricing decisions include manufacturing costs, but NOT costs from other value-chain functions.

Price discrimination is the practice of charging different customers different prices for the same product or service.

Answer the following questions using the information below: Bicker, Inc., is in the process of evaluating a new product using the following information: -What is the estimated life-cycle operating income for the first year?

Target pricing:

When prices are set in a competitive marketplace, product costs are the most important influence on pricing decisions.

A firm using product life-cycle reporting will have a calendar-based focus for this report.

Markups tend to be higher in more competitive markets.

Kaizen costing focuses on improving productivity and eliminating waste through continuous improvements.

Relevant costs for pricing a special order include:

A full-cost base rather than a variable-cost base is a better guide for discounting decisions that may affect long-term customers.

A price-bidding decision for a one-time-only special order includes an analysis of all:

Companies that operate in non competitive environments offering products or services that differ from each other use a market-based approach when making their long-run pricing decisions.

Value engineering can be used to make cost improvements to meet a target cost.

The Accountants Role in the Organization

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, Time, and the Theory of Constraints

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 12: Pricing Decisions and Cost Management

For pricing decisions, full product costs:

Cost bases that include fewer costs also have lower markups.

Price discrimination laws apply only to manufacturers.

Nancy Company has budgeted sales of $300,000 with the following budgeted costs: Compute the average markup percentage for setting prices as a percentage of: a. The full cost of the product b. The variable cost of the product c. Variable manufacturing costs d. Total manufacturing costs

Relevant costs for pricing decisions include manufacturing costs, but NOT costs from other value-chain functions.

Price discrimination is the practice of charging different customers different prices for the same product or service.

Answer the following questions using the information below: Bicker, Inc., is in the process of evaluating a new product using the following information: -What is the estimated life-cycle operating income for the first year?

Target pricing:

When prices are set in a competitive marketplace, product costs are the most important influence on pricing decisions.

A firm using product life-cycle reporting will have a calendar-based focus for this report.

Markups tend to be higher in more competitive markets.

Kaizen costing focuses on improving productivity and eliminating waste through continuous improvements.

Relevant costs for pricing a special order include:

A full-cost base rather than a variable-cost base is a better guide for discounting decisions that may affect long-term customers.

A price-bidding decision for a one-time-only special order includes an analysis of all:

Companies that operate in non competitive environments offering products or services that differ from each other use a market-based approach when making their long-run pricing decisions.

Value engineering can be used to make cost improvements to meet a target cost.

The Accountants Role in the Organization

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, Time, and the Theory of Constraints

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