Question 1

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 2

Answer the following questions using the information below:
Frank's Computer Monitors, Inc., currently sells 17" monitors for $270. It has costs of $210. A competitor is bringing a new 17" monitor to market that will sell for $225. Management believes it must lower the price to $225 to compete in the market for 17" monitors. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Frank's sales are currently 10,000 monitors per year.
-What is the target cost if operating income is 25% of sales?

Accepted Answer

A) $56.25 
B) $67.50 
C) $168.75 
D) $202.50 
A) $56.25 
B) $67.50 
C) $168.75 
D) $202.50

Question 3

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. The difference between the two prices is:

Accepted Answer

A) the estimated amount of profit 
B) that the variable cost base estimates fixed costs in the markup percentage while the full cost base includes an amount for fixed costs 
C) known as price discrimination 
D) caused by the inability of most companies to estimate fixed cost per unit with any degree of reliability 
A) the estimated amount of profit 
B) that the variable cost base estimates fixed costs in the markup percentage while the full cost base includes an amount for fixed costs 
C) known as price discrimination 
D) caused by the inability of most companies to estimate fixed cost per unit with any degree of reliability

Question 4

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 the full cost of the product is:

Accepted Answer

A) 328% 
B) 36% 
C) 228% 
D) 21% 
A) 328% 
B) 36% 
C) 228% 
D) 21%

Question 5

A company engages in predatory pricing when it deliberately prices below its costs in an effort to drive competitors out of the market and restrict supply, and then raises prices rather than enlarge demand.

Accepted Answer

A) True 
 B)False

Question 6

What is price discrimination, and when is it illegal?

Accepted Answer

Price discrimination is charging some cu

Question 7

Answer the following questions using the information below:
Bicker, Inc., is in the process of evaluating a new product using the following information:
  
-What are estimated life-cycle revenues?

Accepted Answer

A) $250,000 
B) $280,000 
C) $310,000 
D) $840,000 
A) $250,000 
B) $280,000 
C) $310,000 
D) $840,000

Question 8

Customers prefer stable and predictable prices over a long time horizon.

Accepted Answer

A) True 
 B)False

Question 9

Robert's Medical Equipment Company manufactures hospital beds. Its most popular model, Deluxe, sells for $5,000. It has variable costs totaling $2,800 and fixed costs of $1,000 per unit, based on an average production run of 5,000 units. It normally has four production runs a year, with $400,000 in setup costs each time. Plant capacity can handle up to six runs a year for a total of 30,000 beds.
A competitor is introducing a new hospital bed similar to Deluxe that will sell for $4,000. Management believes it must lower the price to compete. Marketing believes that the new price will increase sales by 25% a year. The plant manager thinks that production can increase by 25% with the same level of fixed costs. The company currently sells all the Deluxe beds it can produce.
Required:
a. What is the annual operating income from Deluxe at the current price of $5,000?
b. What is the annual operating income from Deluxe if the price is reduced to $4,000 and sales in units increase by 25%?
c. What is the target cost per unit for the new price if target operating income is 20% of sales?

Accepted Answer

@#IMG-DLM& @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& c. $4,

Question 10

When target costing and target pricing are used together:

Accepted Answer

A) the target cost is established first, then the target price 
B) the target cost is the estimated long-run cost that enables a product or service to achieve a desired profit 
C) the focus of target pricing is to undercut the competition 
D) target costs are generally higher than current costs 
A) the target cost is established first, then the target price 
B) the target cost is the estimated long-run cost that enables a product or service to achieve a desired profit 
C) the focus of target pricing is to undercut the competition 
D) target costs are generally higher than current costs

Question 11

The cost of producing a product:

Accepted Answer

A) in highly competitive markets controls pricing 
B) affects the willingness of a company to supply a product 
C) for pricing decisions includes manufacturing costs, but not product design costs 
D) None of these answers are correct. 
A) in highly competitive markets controls pricing 
B) affects the willingness of a company to supply a product 
C) for pricing decisions includes manufacturing costs, but not product design costs 
D) None of these answers are correct.

Question 12

Relevant costs of a bidding decision should EXCLUDE revenues lost on lower-priced sales to existing customers.

Accepted Answer

A) True 
 B)False

Question 13

The first step in target pricing is to determine the target cost of the product.

Accepted Answer

A) True 
 B)False

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 target operating income?

Accepted Answer

A) $1,200,000 
B) $600,000 
C) $621,000 
D) $1,242,000 
A) $1,200,000 
B) $600,000 
C) $621,000 
D) $1,242,000

Question 15

Stone and Bicker are starting a new business venture and are in the process of evaluating their product lines. Information for one new product, hand-made lamps, 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?

Accepted Answer

a. Estimat

Question 16

What advice would you give a company to avoid the appearance of predatory pricing?

Accepted Answer

Useful advice for a company to avoid the

Question 17

Cross-functional engineering teams may include:

Accepted Answer

A) marketing managers 
B) suppliers 
C) management accountants 
D) All of these answers are correct. 
A) marketing managers 
B) suppliers 
C) management accountants 
D) All of these answers are correct.

Question 18

Answer the following questions using the information below:
Cox Lighting manufactures table lamps and is considering raising the price by $20 a unit for the coming year. With a $20 price increase, demand is expected to fall by 2,000 units.
  
-The demand for this product is:

Accepted Answer

A) greatly inelastic 
B) slightly inelastic 
C) elastic 
D) indeterminable 
A) greatly inelastic 
B) slightly inelastic 
C) elastic 
D) indeterminable

Question 19

Graphic analysis of incurred and locked-in costs provides several insights as to how the different concepts influence decisions. Which of the following statements is FALSE?

Accepted Answer

A) Costs are generally locked in before they are incurred. 
B) After a product's design has been approved, costs are difficult to influence. 
C) When and how costs are locked in are more important than when and how costs are incurred. 
D) Most costs are locked in during the manufacturing process. 
A) Costs are generally locked in before they are incurred. 
B) After a product's design has been approved, costs are difficult to influence. 
C) When and how costs are locked in are more important than when and how costs are incurred. 
D) Most costs are locked in during the manufacturing process.

Question 20

To understand how competitors might price competing products, a company:

Accepted Answer

A) needs to understand the competitor's technologies and financial conditions 
B) may get information from suppliers that service the competitor 
C) may use reverse engineering 
D) All of these answers are correct. 
A) needs to understand the competitor's technologies and financial conditions 
B) may get information from suppliers that service the competitor 
C) may use reverse engineering 
D) All of these answers are correct.

A locked-in cost is a(n):

A company engages in predatory pricing when it deliberately prices below its costs in an effort to drive competitors out of the market and restrict supply, and then raises prices rather than enlarge demand.

What is price discrimination, and when is it illegal?

Answer the following questions using the information below: Bicker, Inc., is in the process of evaluating a new product using the following information: -What are estimated life-cycle revenues?

Customers prefer stable and predictable prices over a long time horizon.

When target costing and target pricing are used together:

The cost of producing a product:

Relevant costs of a bidding decision should EXCLUDE revenues lost on lower-priced sales to existing customers.

The first step in target pricing is to determine the target cost of the product.

What advice would you give a company to avoid the appearance of predatory pricing?

Cross-functional engineering teams may include:

Answer the following questions using the information below: Cox Lighting manufactures table lamps and is considering raising the price by $20 a unit for the coming year. With a $20 price increase, demand is expected to fall by 2,000 units. -The demand for this product is:

Graphic analysis of incurred and locked-in costs provides several insights as to how the different concepts influence decisions. Which of the following statements is FALSE?

To understand how competitors might price competing products, a company:

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

A locked-in cost is a(n):

A company engages in predatory pricing when it deliberately prices below its costs in an effort to drive competitors out of the market and restrict supply, and then raises prices rather than enlarge demand.

What is price discrimination, and when is it illegal?

Answer the following questions using the information below: Bicker, Inc., is in the process of evaluating a new product using the following information: -What are estimated life-cycle revenues?

Customers prefer stable and predictable prices over a long time horizon.

When target costing and target pricing are used together:

The cost of producing a product:

Relevant costs of a bidding decision should EXCLUDE revenues lost on lower-priced sales to existing customers.

The first step in target pricing is to determine the target cost of the product.

What advice would you give a company to avoid the appearance of predatory pricing?

Cross-functional engineering teams may include:

Answer the following questions using the information below: Cox Lighting manufactures table lamps and is considering raising the price by $20 a unit for the coming year. With a $20 price increase, demand is expected to fall by 2,000 units. -The demand for this product is:

Graphic analysis of incurred and locked-in costs provides several insights as to how the different concepts influence decisions. Which of the following statements is FALSE?

To understand how competitors might price competing products, a company:

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