Question 1

Dumping occurs when a company is trying to get rid of out-of-style products and substantially reduces their prices.

Accepted Answer

A) True 
 B)False

Question 2

Central Dental Company manufactures dental chairs. Its most popular model, Deluxe, sells for $2,500. It has variable costs totaling $1,400 and fixed costs of $500 per unit based on an average production run of 5,000 units. It normally has four production runs a year with $200,000 setup costs each time. Plant capacity can handle up to six runs a year for a total of 30,000 chairs.
A competitor is introducing a new dental chair similar to Deluxe that will sell for $2,000. Management believes it must lower the price in order to compete. Marketing believes that the new price will increase sales by 25 percent a year. The plant manager thinks that production can increase by 25 percent with the same level of fixed costs. The company currently sells all the Deluxe chairs it can produce.
Required:
What is the target cost per unit for the new price if target profit is 20 percent of sales?

Accepted Answer

$2,000 - $

Question 3

Use the information below to answer the following question(s).
Pershing Company budgeted the following costs for the production of its one and only product, blades, for the next fiscal year:
   Pershing has a target profit of $150,000.
-What is the target cost if target operating income is 25% of sales?

Accepted Answer

A)  $105.00 
B)  $145.00 
C)  $140.00 
D)  $135.00 
E)  $112.50 
A)  $105.00 
B)  $145.00 
C)  $140.00 
D)  $135.00 
E)  $112.50

Question 4

Which of the following is true concerning value-engineering?

Accepted Answer

A)  The goal of value-engineering is to eliminate locked-in costs. 
B)  After a product's design has been value-engineered, costs are difficult to influence. 
C)  When and how costs are locked in are more important than when and how costs are incurred. 
D)  Value-engineering does not work when dealing with direct costs. 
E)  Value-engineering activities reduce both value-added and non-value-added costs. 
A)  The goal of value-engineering is to eliminate locked-in costs. 
B)  After a product's design has been value-engineered, costs are difficult to influence. 
C)  When and how costs are locked in are more important than when and how costs are incurred. 
D)  Value-engineering does not work when dealing with direct costs. 
E)  Value-engineering activities reduce both value-added and non-value-added costs.

Question 5

Value engineering is a time-and-motion system that can result in: improvements in product designs, changes in material specifications, or modifications in process methods.

Accepted Answer

A) True 
 B)False

Question 6

Answer the following question(s) using the information below.
Gerry's Generator Supply is approached by Mr. Gladstone, 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. Gladstone wanted a long-term commitment for supplying this product, what price would most likely be quoted to him?

Accepted Answer

A)  $1,000 
B)  $1,200 
C)  $1,290 
D)  $1,400 
E)  $1,075 
A)  $1,000 
B)  $1,200 
C)  $1,290 
D)  $1,400 
E)  $1,075

Question 7

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 8

The three major influences on pricing decisions are: costs, competitors, and customers.

Accepted Answer

A) True 
 B)False

Question 9

Price discrimination to customers is the practice of

Accepted Answer

A)  setting different prices for different products. 
B)  charging different prices for quantity amounts. 
C)  using variable costing for some products and full costing for other products when setting prices. 
D)  charging different prices to different customers or clients for the same products or services. 
E)  changing prices frequently. 
A)  setting different prices for different products. 
B)  charging different prices for quantity amounts. 
C)  using variable costing for some products and full costing for other products when setting prices. 
D)  charging different prices to different customers or clients for the same products or services. 
E)  changing prices frequently.

Question 10

Answer the following question(s) using the information below.
Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Welch Manufacturing has a policy of adding a 10% markup to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers:
  
-If the European customer wanted a long-term commitment for supplying this product, what price would most likely be quoted?

Accepted Answer

A)  $66 
B)  $180 
C)  $155 
D)  $217 
E)  $198 
A)  $66 
B)  $180 
C)  $155 
D)  $217 
E)  $198

Question 11

Most of a product's life-cycle costs are locked in by decisions made during the ________ business function of the value chain.

Accepted Answer

A)  design 
B)  manufacturing 
C)  customer-service 
D)  marketing 
E)  research 
A)  design 
B)  manufacturing 
C)  customer-service 
D)  marketing 
E)  research

Question 12

Schlickau Company manufactures basketball backboards. The following information pertains to the
company's normal operations per month:
     Required:
a. For long-run pricing, what is the full-cost base per unit?
b. Schlickau Company is approached by an overseas city to fulfill a one-time-only special order for 1,000 units. All cost relationships remain the same except for an additional one-time setup charge of $40,000. No additional design, marketing, or distribution costs will be incurred. What is the minimum acceptable bid per unit on this one-time-only special order?

Accepted Answer

The answer of Schlickau Company manufactures basketball backboards. The following...

Question 13

Which of the following is true of products with a long life cycle?

Accepted Answer

A)  Their costs are more difficult to manage, early in their life cycle. 
B)  It is not as important to have accurate predictions of revenues. 
C)  They highlight the interrelationships with other parts of the life cycle. 
D)  They are highly visible and therefore must be carefully controlled. 
E)  A smaller fraction of the total life costs are actually incurred at the time when costs are locked-in. 
A)  Their costs are more difficult to manage, early in their life cycle. 
B)  It is not as important to have accurate predictions of revenues. 
C)  They highlight the interrelationships with other parts of the life cycle. 
D)  They are highly visible and therefore must be carefully controlled. 
E)  A smaller fraction of the total life costs are actually incurred at the time when costs are locked-in.

Question 14

What is the Satellite Inc. life cycle budgeted revenue?

Accepted Answer

A)  $500,000 
B)  $560,000 
C)  $1,620,000 
D)  $1,680,000 
E)  $1,500,000 
A)  $500,000 
B)  $560,000 
C)  $1,620,000 
D)  $1,680,000 
E)  $1,500,000

Question 15

Collusive pricing occurs when

Accepted Answer

A)  a company wants two products to sell for the same, or almost the same, amount. 
B)  a company wants a product to sell for the same as a competitor's product. 
C)  two or more companies agree to sell a product at a price higher than should be expected. 
D)  competitors are part of the same large parent organization. 
E)  one large company dominates an industry. 
A)  a company wants two products to sell for the same, or almost the same, amount. 
B)  a company wants a product to sell for the same as a competitor's product. 
C)  two or more companies agree to sell a product at a price higher than should be expected. 
D)  competitors are part of the same large parent organization. 
E)  one large company dominates an industry.

Question 16

Peak-load pricing focuses on direct costs when setting prices for peak and nonpeak periods.

Accepted Answer

A) True 
 B)False

Question 17

Use the information below to answer the following question(s).
Pershing Company budgeted the following costs for the production of its one and only product, blades, for the next fiscal year:
   Pershing has a target profit of $150,000.
-The target pricing approach is easier when

Accepted Answer

A)  products highly differentiated and the consumer life cycle is shorter. 
B)  products highly differentiated and the consumer life cycle is longer. 
C)  products are not well differentiated and the consumer life cycle is shorter. 
D)  products are not well differentiated and the consumer life cycle is longer. 
E)  little is known about market factors. 
A)  products highly differentiated and the consumer life cycle is shorter. 
B)  products highly differentiated and the consumer life cycle is longer. 
C)  products are not well differentiated and the consumer life cycle is shorter. 
D)  products are not well differentiated and the consumer life cycle is longer. 
E)  little is known about market factors.

Question 18

Customer life-cycle costs focus on the total costs to a customer of acquiring and using a product or service until it is replaced.

Accepted Answer

A) True 
 B)False

Question 19

An airline charges business and pleasure travellers different amounts. This is an example of

Accepted Answer

A)  customer-preference pricing. 
B)  high-load pricing. 
C)  peak-load pricing. 
D)  price discrimination. 
E)  off-load pricing. 
A)  customer-preference pricing. 
B)  high-load pricing. 
C)  peak-load pricing. 
D)  price discrimination. 
E)  off-load pricing.

Question 20

Life-cycle costing, from an environmental sustainability perspective, considers the end of a products life-cycle to include disposal and recycling costs.

Accepted Answer

A) True 
 B)False

Dumping occurs when a company is trying to get rid of out-of-style products and substantially reduces their prices.

Which of the following is true concerning value-engineering?

Value engineering is a time-and-motion system that can result in: improvements in product designs, changes in material specifications, or modifications in process methods.

The three major influences on pricing decisions are: costs, competitors, and customers.

Price discrimination to customers is the practice of

Most of a product's life-cycle costs are locked in by decisions made during the ________ business function of the value chain.

Which of the following is true of products with a long life cycle?

What is the Satellite Inc. life cycle budgeted revenue?

Collusive pricing occurs when

Peak-load pricing focuses on direct costs when setting prices for peak and nonpeak periods.

Use the information below to answer the following question(s). Pershing Company budgeted the following costs for the production of its one and only product, blades, for the next fiscal year: Pershing has a target profit of $150,000. -The target pricing approach is easier when

Customer life-cycle costs focus on the total costs to a customer of acquiring and using a product or service until it is replaced.

An airline charges business and pleasure travellers different amounts. This is an example of

Life-cycle costing, from an environmental sustainability perspective, considers the end of a products life-cycle to include disposal and recycling costs.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Quantitative Analyses of Cost Functions

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 12: Pricing Decisions, Product Profitability Decisions, and Cost Management

Dumping occurs when a company is trying to get rid of out-of-style products and substantially reduces their prices.

Which of the following is true concerning value-engineering?

Value engineering is a time-and-motion system that can result in: improvements in product designs, changes in material specifications, or modifications in process methods.

The three major influences on pricing decisions are: costs, competitors, and customers.

Price discrimination to customers is the practice of

Most of a product's life-cycle costs are locked in by decisions made during the ________ business function of the value chain.

Which of the following is true of products with a long life cycle?

What is the Satellite Inc. life cycle budgeted revenue?

Collusive pricing occurs when

Peak-load pricing focuses on direct costs when setting prices for peak and nonpeak periods.

Use the information below to answer the following question(s). Pershing Company budgeted the following costs for the production of its one and only product, blades, for the next fiscal year: Pershing has a target profit of $150,000. -The target pricing approach is easier when

Customer life-cycle costs focus on the total costs to a customer of acquiring and using a product or service until it is replaced.

An airline charges business and pleasure travellers different amounts. This is an example of

Life-cycle costing, from an environmental sustainability perspective, considers the end of a products life-cycle to include disposal and recycling costs.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Quantitative Analyses of Cost Functions

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters