Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which of the following factors should NOT be considered when pricing a special order?

Accepted Answer

A) the likely bids of competitors 
B) the incremental cost of one unit of product 
C) revenues that will be lost on existing sales if prices are lowered 
D) stable pricing to earn the desired long-run return 
A) the likely bids of competitors 
B) the incremental cost of one unit of product 
C) revenues that will be lost on existing sales if prices are lowered 
D) stable pricing to earn the desired long-run return

Question 3

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 4

Grace Greeting Cards Incorporated is starting a new business venture and are in the process of evaluating its product lines. Information for one new product, traditional parchment grade cards, is as follows:
   Required:
a. What are the estimated life-cycle revenues?
b. What is the estimated life-cycle operating income for the first year?
c. What is the estimated life-cycle operating income per year for the years after the first year?
d. What is the total estimated life-cycle operating income?

Accepted Answer

a. Estimat

Question 5

When demand for a product is inelastic and prices are increased, usually demand will:

Accepted Answer

A) increase, and operating profits will increase 
B) remain the same, and operating profits will increase 
C) decrease, and operating profits will decrease 
D) remain the same, and operating profits will decrease 
A) increase, and operating profits will increase 
B) remain the same, and operating profits will increase 
C) decrease, and operating profits will decrease 
D) remain the same, and operating profits will decrease

Question 6

Target costing begins with the price the customer is willing to pay and the "backs-into" what the product should cost.

Accepted Answer

A) True 
 B)False

Question 7

When demand for a product is very elastic and prices are increased, demand will:

Accepted Answer

A) remain the same, and operating profits will increase 
B) remain the same, and operating profits may either increase or decrease 
C) decrease, and operating profits will decrease 
D) decrease, and operating profits may either increase or decrease 
A) remain the same, and operating profits will increase 
B) remain the same, and operating profits may either increase or decrease 
C) decrease, and operating profits will decrease 
D) decrease, and operating profits may either increase or decrease

Question 8

Life-cycle budgeting:

Accepted Answer

A) has little in common with target pricing 
B) is most useful to companies that manufacture small items such as household plastics 
C) helps companies estimate revenues over a multiyear horizon 
D) gives companies more insight into total costs when manufacturing costs consume the majority of the resources 
A) has little in common with target pricing 
B) is most useful to companies that manufacture small items such as household plastics 
C) helps companies estimate revenues over a multiyear horizon 
D) gives companies more insight into total costs when manufacturing costs consume the majority of the resources

Question 9

Value engineering has the objective of increasing costs while still satisfying customer needs.

Accepted Answer

A) True 
 B)False

Question 10

The full-cost formula for pricing is relatively simple to use because it does NOT require a detailed analysis of cost behavior.

Accepted Answer

A) True 
 B)False

Question 11

The markup percentage is usually higher if the cost base used is:

Accepted Answer

A) the full cost of the product 
B) the variable cost of the product 
C) variable manufacturing costs 
D) total manufacturing costs 
A) the full cost of the product 
B) the variable cost of the product 
C) variable manufacturing costs 
D) total manufacturing costs

Question 12

Answer the following questions using the information below:
After conducting a market research study, Ed 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 $120. The annual target sales volume for interior doors is 20,000. Ed has target operating income of 20% of sales.
-What are target sales revenues?

Accepted Answer

A) $1,920,000 
B) $4,000,000 
C) $2,400,000 
D) None of these answers is correct. 
A) $1,920,000 
B) $4,000,000 
C) $2,400,000 
D) None of these answers is correct.

Question 13

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 three years?

Accepted Answer

A) $174,000 
B) $204,000 
C) $636,000 
D) $840,000 
A) $174,000 
B) $204,000 
C) $636,000 
D) $840,000

Question 14

Answer the following questions using the information below:
After conducting a market research study, Harry Products decided to produce an electric coffee pot to complement its line of kitchen products. It is estimated that the new coffee pot can be sold at a target price of $23. The annual target sales volume for the coffee pot is 300,000. Potter has target operating income of 18% of sales.
-What is the total target cost?

Accepted Answer

A) $1,242,000 
B) $5,658,000 
C) $6,900,000 
D) $500,000 
A) $1,242,000 
B) $5,658,000 
C) $6,900,000 
D) $500,000

Question 15

Companies should only produce and sell units as long as:

Accepted Answer

A) there is customer demand for the product 
B) the competition allows it 
C) the revenue from an additional unit exceeds the cost of producing it 
D) there is a generous supply of low-cost direct materials 
A) there is customer demand for the product 
B) the competition allows it 
C) the revenue from an additional unit exceeds the cost of producing it 
D) there is a generous supply of low-cost direct materials

Question 16

Answer the following questions using the information below:
Moises, Black, Elderberry and Associates are in the process of evaluating its new client services for the business consulting division.
  
-What is estimated life-cycle operating income for the first year?

Accepted Answer

A) $(520,000) 
B) $(700,000) 
C) $2,800,000 
D) $3,320,000 
A) $(520,000) 
B) $(700,000) 
C) $2,800,000 
D) $3,320,000

Question 17

Answer the following questions using the information below:
Block Island TV currently sells large televisions for $360. It has costs of $280. A competitor is bringing a new large television to market that will sell for $300. Management believes it must lower the price to $300 to compete in the market for large televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Block Island TV sales are currently 100,000 televisions per year.
-What is the target cost if target operating income is 25% of sales?

Accepted Answer

A) $75 
B) $90 
C) $225 
D) $270 
A) $75 
B) $90 
C) $225 
D) $270

Question 18

Rework is an example of a value-added cost.

Accepted Answer

A) True 
 B)False

Question 19

When demand is strong, firms usually increase markups.

Accepted Answer

A) True 
 B)False

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

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

Which of the following factors should NOT be considered when pricing a special order?

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

When demand for a product is inelastic and prices are increased, usually demand will:

Target costing begins with the price the customer is willing to pay and the "backs-into" what the product should cost.

When demand for a product is very elastic and prices are increased, demand will:

Life-cycle budgeting:

Value engineering has the objective of increasing costs while still satisfying customer needs.

The full-cost formula for pricing is relatively simple to use because it does NOT require a detailed analysis of cost behavior.

The markup percentage is usually higher if the cost base used is:

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 three years?

Companies should only produce and sell units as long as:

Answer the following questions using the information below: Moises, Black, Elderberry and Associates are in the process of evaluating its new client services for the business consulting division. -What is estimated life-cycle operating income for the first year?

Rework is an example of a value-added cost.

When demand is strong, firms usually increase markups.

Predatory pricing is a type of price discrimination that:

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

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

Which of the following factors should NOT be considered when pricing a special order?

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

When demand for a product is inelastic and prices are increased, usually demand will:

Target costing begins with the price the customer is willing to pay and the "backs-into" what the product should cost.

When demand for a product is very elastic and prices are increased, demand will:

Life-cycle budgeting:

Value engineering has the objective of increasing costs while still satisfying customer needs.

The full-cost formula for pricing is relatively simple to use because it does NOT require a detailed analysis of cost behavior.

The markup percentage is usually higher if the cost base used is:

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 three years?

Companies should only produce and sell units as long as:

Answer the following questions using the information below: Moises, Black, Elderberry and Associates are in the process of evaluating its new client services for the business consulting division. -What is estimated life-cycle operating income for the first year?

Rework is an example of a value-added cost.

When demand is strong, firms usually increase markups.

Predatory pricing is a type of price discrimination that:

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