Question 1

Place the following steps for the implementation of target costing in order:

Accepted Answer

A) B D A C 
B) B A D C 
C) A D B C 
D) A B C D 
A) B D A C 
B) B A D C 
C) A D B C 
D) A B C D

Question 2

Cost accounting systems focus on when costs are:

Accepted Answer

A) incurred 
B) locked in 
C) paid for 
D) used for setting prices for products and services 
A) incurred 
B) locked in 
C) paid for 
D) used for setting prices for products and services

Question 3

Companies must always examine their pricing:

Accepted Answer

A) based on the supply of the product 
B) based on the cost of producing the product 
C) through the eyes of their customers 
D) through the eyes of their competitors 
A) based on the supply of the product 
B) based on the cost of producing the product 
C) through the eyes of their customers 
D) through the eyes of their competitors

Question 4

Explain the difference between locked in costs and costs incurred. Which of these types of costs does a traditional accounting system emphasize? At which stage of the value chain are most costs locked-in? At which stage of the value chain are most costs incurred? What implication does this have for good cost management?

Accepted Answer

Locked-in costs are costs that have not

Question 5

To comply with antitrust laws, a company must NOT engage in predatory pricing, dumping, or collusive pricing which lessen competition, put another company at a competitive disadvantage, or harm consumers.

Accepted Answer

A) True 
 B)False

Question 6

When price discrimination is effective, cost is NOT a major factor in setting prices.

Accepted Answer

A) True 
 B)False

Question 7

Timothy Company has budgeted sales of $780,000 with the following budgeted costs:
   Compute the average markup percentage for setting prices as a percentage of:
a. Total manufacturing costs
b. The variable cost of the product
c. The full cost of the product
d. Variable manufacturing costs

Accepted Answer

a. $168,000 + $132,000 + $96,000 + $108,

Question 8

Answer the following questions using the information below:
Black Forrest manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $240 per table, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Black Forrest policy to add a 50% markup to full costs.
-A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style. Black Forrest is invited to submit a bid to the hotel chain. What per unit price will Black Forrest most likely bid on this long-term order?

Accepted Answer

A) $144 per unit 
B) $216 per unit 
C) $360 per unit 
D) $240 per unit 
A) $144 per unit 
B) $216 per unit 
C) $360 per unit 
D) $240 per unit

Question 9

Value engineering can reduce costs by all of the following EXCEPT:

Accepted Answer

A) simplifying the design and thereby decreasing the number of component parts 
B) reducing the number of features offered 
C) redesigning alternative options over and over until the wishes of all cross-functional team members are accommodated 
D) building efficiencies into value-added costs 
A) simplifying the design and thereby decreasing the number of component parts 
B) reducing the number of features offered 
C) redesigning alternative options over and over until the wishes of all cross-functional team members are accommodated 
D) building efficiencies into value-added costs

Question 10

Three major influences on pricing decisions are:

Accepted Answer

A) competition, costs, and customers 
B) competition, demand, and production efficiency 
C) continuous improvement, customer satisfaction, and supply 
D) variable costs, fixed costs, and mixed costs 
A) competition, costs, and customers 
B) competition, demand, and production efficiency 
C) continuous improvement, customer satisfaction, and supply 
D) variable costs, fixed costs, and mixed costs

Question 11

Life-cycle budgeting and life-cycle costing help highlight:

Accepted Answer

A) an increase in customer-service costs due to using inferior materials 
B) high production costs caused by a complex design 
C) large ordering costs due to the great number of component parts used 
D) an increase in annual operating income resulting from the new product 
A) an increase in customer-service costs due to using inferior materials 
B) high production costs caused by a complex design 
C) large ordering costs due to the great number of component parts used 
D) an increase in annual operating income resulting from the new product

Question 12

A product's markup percentage needs to cover operating profits when the cost base is:

Accepted Answer

A) the full cost of the product 
B) the variable cost of the product 
C) variable manufacturing costs 
D) All of these answers are correct. 
A) the full cost of the product 
B) the variable cost of the product 
C) variable manufacturing costs 
D) All of these answers are correct.

Question 13

For long-run pricing decisions, using stable prices has the advantage of:

Accepted Answer

A) minimizing the need to monitor competitor's prices frequently 
B) reducing the need to change cost structures frequently 
C) reducing competition 
D) helping to build buyer-seller relationships 
A) minimizing the need to monitor competitor's prices frequently 
B) reducing the need to change cost structures frequently 
C) reducing competition 
D) helping to build buyer-seller relationships

Question 14

Answer the following questions using the information below:
Ernie Shavers, Inc. manufactures electric shavers and is considering decreasing the price by $3 a unit for the coming year. With a $3 price decrease, the unit demand is expected to increase by 25%, and a high volume materials discount is expected to decrease the variable costs per unit by $1 per unit.
  
-The demand for this product is:

Accepted Answer

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

Question 15

In cost-plus pricing, the markup is a rigid number that determines the actual selling price.

Accepted Answer

A) True 
 B)False

Question 16

Answer the following questions using the information below:
Delgreco Products manufactures high-tech cell phones. Delgreco Products has a policy of adding a 30% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month:
    
-Which one of the following activities would most likely be considered a long-run pricing decision?

Accepted Answer

A) one-time-only special order pricing 
B) product mix adjustments in a competitive market 
C) setting prices to generate a reasonable rate of return on investment 
D) changing prices in response to weak demand 
A) one-time-only special order pricing 
B) product mix adjustments in a competitive market 
C) setting prices to generate a reasonable rate of return on investment 
D) changing prices in response to weak demand

Question 17

All of the following are true regarding price discrimination EXCEPT that:

Accepted Answer

A) the laws apply to service providers, but not manufacturers 
B) it is permissible if price differences can be explained 
C) it is illegal only if the intent is to destroy competition 
D) it is most likely to occur when the cost base is the full cost of the product 
A) the laws apply to service providers, but not manufacturers 
B) it is permissible if price differences can be explained 
C) it is illegal only if the intent is to destroy competition 
D) it is most likely to occur when the cost base is the full cost of the product

Question 18

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 the estimated life-cycle operating income for the first two years?

Accepted Answer

A) $(740,000) 
B) $(700,000) 
C) $1,600,000 
D) $5,600,000 
A) $(740,000) 
B) $(700,000) 
C) $1,600,000 
D) $5,600,000

Question 19

A target price is the estimated price for a product or service that potential customers are willing to pay.

Accepted Answer

A) True 
 B)False

Question 20

Answer the following questions using the information below:
Rogers' Heaters is approached by Ms. Sushi, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Rogers' Heaters has excess capacity. The following per unit data apply for sales to regular customers:
  
-For Rogers' Heaters, what is the minimum acceptable price of this one-time-only special order?

Accepted Answer

A) $580 
B) $780 
C) $520 
D) $1,014 
A) $580 
B) $780 
C) $520 
D) $1,014

Place the following steps for the implementation of target costing in order:

Cost accounting systems focus on when costs are:

Companies must always examine their pricing:

To comply with antitrust laws, a company must NOT engage in predatory pricing, dumping, or collusive pricing which lessen competition, put another company at a competitive disadvantage, or harm consumers.

When price discrimination is effective, cost is NOT a major factor in setting prices.

Timothy Company has budgeted sales of $780,000 with the following budgeted costs: Compute the average markup percentage for setting prices as a percentage of: a. Total manufacturing costs b. The variable cost of the product c. The full cost of the product d. Variable manufacturing costs

Value engineering can reduce costs by all of the following EXCEPT:

Three major influences on pricing decisions are:

Life-cycle budgeting and life-cycle costing help highlight:

A product's markup percentage needs to cover operating profits when the cost base is:

For long-run pricing decisions, using stable prices has the advantage of:

In cost-plus pricing, the markup is a rigid number that determines the actual selling price.

All of the following are true regarding price discrimination EXCEPT that:

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 the estimated life-cycle operating income for the first two years?

A target price is the estimated price for a product or service that potential customers are willing to pay.

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

Place the following steps for the implementation of target costing in order:

Cost accounting systems focus on when costs are:

Companies must always examine their pricing:

To comply with antitrust laws, a company must NOT engage in predatory pricing, dumping, or collusive pricing which lessen competition, put another company at a competitive disadvantage, or harm consumers.

When price discrimination is effective, cost is NOT a major factor in setting prices.

Timothy Company has budgeted sales of $780,000 with the following budgeted costs: Compute the average markup percentage for setting prices as a percentage of: a. Total manufacturing costs b. The variable cost of the product c. The full cost of the product d. Variable manufacturing costs

Value engineering can reduce costs by all of the following EXCEPT:

Three major influences on pricing decisions are:

Life-cycle budgeting and life-cycle costing help highlight:

A product's markup percentage needs to cover operating profits when the cost base is:

For long-run pricing decisions, using stable prices has the advantage of:

In cost-plus pricing, the markup is a rigid number that determines the actual selling price.

All of the following are true regarding price discrimination EXCEPT that:

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 the estimated life-cycle operating income for the first two years?

A target price is the estimated price for a product or service that potential customers are willing to pay.

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