Question 1

Managers have little discretion in setting prices in market situations which are not competitive.

Accepted Answer

A) True 
 B)False

Question 2

The "plus" relates to the percentage target return on investment in cost-plus pricing.

Accepted Answer

A) True 
 B)False

Question 3

Companies that produce high quality products do not have to pay attention to the actions of their competitors.

Accepted Answer

A) True 
 B)False

Question 4

Target pricing is based on

Accepted Answer

A)  engineered cost. 
B)  variable manufacturing and nonmanufacturing costs. 
C)  full product cost. 
D)  what customers are willing to pay. 
E)  full manufacturing cost. 
A)  engineered cost. 
B)  variable manufacturing and nonmanufacturing costs. 
C)  full product cost. 
D)  what customers are willing to pay. 
E)  full manufacturing cost.

Question 5

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 operating income?

Accepted Answer

A)  $240,000 
B)  $360,000 
C)  $200,000 
D)  $192,000 
E)  $400,000 
A)  $240,000 
B)  $360,000 
C)  $200,000 
D)  $192,000 
E)  $400,000

Question 6

Henderson Company is in the process of evaluating a new part using the following information.
• Part SLC2002 has one production run each month, each with $16,000 in setup costs.
• Part SLC2002 incurred $40,000 in development costs and is expected to be produced over the next three years.
• Direct costs of producing Part SLC2002 are $56,000 per run of 24,000 parts each.
• Indirect manufacturing costs charged to each run are $88,000.
• Destination charges for each run average $18,000.
• Part SLC2002 is selling for $12.50 in the Canada and $25 in all other countries. Sales are one-third domestic and two-thirds exported.
• Sales units equal production units each year.
Required:
a. What are the estimated life-cycle revenues?
b. What is the estimated life-cycle operating income if the product life cycle is one year?

Accepted Answer

a.
 @#IMG-DLM& @#IMG-DLM& b.
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Question 7

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.
-Which of the following best describes the cost-plus pricing approach?

Accepted Answer

A)  Cost base + Markup component = Prospective selling price 
B)  Prospective selling price + Cost base = Markup component 
C)  Cost base + Gross margin = Prospective selling price 
D)  Variable cost + Fixed cost + Contribution margin = Prospective selling price 
E)  Cost base plus markup ÷ 100% = selling profit percentage 
A)  Cost base + Markup component = Prospective selling price 
B)  Prospective selling price + Cost base = Markup component 
C)  Cost base + Gross margin = Prospective selling price 
D)  Variable cost + Fixed cost + Contribution margin = Prospective selling price 
E)  Cost base plus markup ÷ 100% = selling profit percentage

Question 8

The target rate of return on investment is the target operating income that an organization must earn divided by invested capital.

Accepted Answer

A) True 
 B)False

Question 9

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.
-If total invested capital is $1,000,000, what is the company's target rate of return on investment?

Accepted Answer

A)  15 % 
B)  20 % 
C)  25 % 
D)  30 % 
E)  35 % 
A)  15 % 
B)  20 % 
C)  25 % 
D)  30 % 
E)  35 %

Question 10

What are the Satellite Inc. life cycle budgeted costs?

Accepted Answer

A)  $424,000 
B)  $1,272,000 
C)  $639,000 
D)  $1,392,000 
E)  $298,000 
A)  $424,000 
B)  $1,272,000 
C)  $639,000 
D)  $1,392,000 
E)  $298,000

Question 11

Which of the following are examples of downstream costs?

Accepted Answer

A)  R&D, distribution, marketing, design 
B)  production, distribution, marketing, design 
C)  R&D, design, production 
D)  production, R&D, distribution, marketing, design 
E)  after-sales service, distribution, marketing 
A)  R&D, distribution, marketing, design 
B)  production, distribution, marketing, design 
C)  R&D, design, production 
D)  production, R&D, distribution, marketing, design 
E)  after-sales service, distribution, marketing

Question 12

In deciding whether to accept a special sales order, any fixed costs that would remain unchanged are considered irrelevant data.

Accepted Answer

A) True 
 B)False

Question 13

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.
-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 per unit is the estimated long-run price per unit that enables a product or service to achieve the target profit per unit. 
C)  the target price is set to undercut the competition. 
D)  target costs are higher than current costs because of inflation over time. 
E)  target price is the estimated price for a product or service that a potential customer will be willing to pay. 
A)  the target cost is established first, then the target price. 
B)  the target cost per unit is the estimated long-run price per unit that enables a product or service to achieve the target profit per unit. 
C)  the target price is set to undercut the competition. 
D)  target costs are higher than current costs because of inflation over time. 
E)  target price is the estimated price for a product or service that a potential customer will be willing to pay.

Question 14

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 profit percentage as a percentage of total manufacturing costs?

Accepted Answer

A)  61% 
B)  21% 
C)  47% 
D)  27% 
E)  35% 
A)  61% 
B)  21% 
C)  47% 
D)  27% 
E)  35%

Question 15

At a management meeting, you just finished presenting your cost analysis report, showing unit costs last year for 60,000 widgets produced were $435.00. The sales manager then complained that she was going to lose a special overseas sale because the customer had indicated they could only pay $425.00. She knew from sources that no competitor would be bidding below $440, and she complained that if the company had better cost control, there would be more profit for everyone. The production manager also would like to take the extra job, since even with the extra production, the plant would be under-capacity.
Required:
What type of information would you need in order to be able to determine if the extra order could be profitably produced if the selling price was held to $425 per unit?

Accepted Answer

Unit costs are often misleading, usually

Question 16

Your company produces 700,000 widgets per year but has the capacity to produce 950,000 units. Company records show the following; full product costs = $85 per unit, which includes fixed manufacturing overhead of $11, and variable overhead of $4 per unit, and direct variable costs of $22, all based on the current 700,000 production run. If the company wanted to bid on a special one-time order, based on the above information only, what would be its minimum bid?

Accepted Answer

A)  $59 
B)  $81 
C)  $63 
D)  $74 
E)  $85 
A)  $59 
B)  $81 
C)  $63 
D)  $74 
E)  $85

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.
-A product's markup percentage would need to cover fixed manufacturing costs if

Accepted Answer

A)  the company has only fixed manufacturing costs. 
B)  the company wants to break-even during the fiscal period. 
C)  the company wants to make a profit. 
D)  the cost base does not include fixed manufacturing costs. 
E)  the cost base includes fixed manufacturing costs as well as variable costs. 
A)  the company has only fixed manufacturing costs. 
B)  the company wants to break-even during the fiscal period. 
C)  the company wants to make a profit. 
D)  the cost base does not include fixed manufacturing costs. 
E)  the cost base includes fixed manufacturing costs as well as variable costs.

Question 18

The strategy in which companies systematically evaluate all aspects of the value-chain business functions with the objective of reducing costs to meet customers' needs is referred to as

Accepted Answer

A)  full costing. 
B)  value engineering. 
C)  designed-in costs. 
D)  value analysis. 
E)  cost incurrence. 
A)  full costing. 
B)  value engineering. 
C)  designed-in costs. 
D)  value analysis. 
E)  cost incurrence.

Question 19

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:
• Every six months a new lamp pattern will be put into production. Each new pattern will require $11,200 in setup costs.
• The lamp product line incurred $48,000 in development costs and is expected to be produced over the next six years.
• Direct costs of producing the lamps average $144 each. Each lamp requires 12 labour-hours and 2 machine-hours.
• Indirect manufacturing costs are estimated at $160,000 per year.
• Customer service expenses average $16 per lamp.
• Current sales are expected to be 2,000 units of each lamp pattern. Each lamp sells for $224.
• Sales units equal production units each year.
Required:
a. What are the estimated life-cycle revenues?
b. What is the estimated life-cycle operating income if the product life cycle is one year?

Accepted Answer

a.
Estimat

Question 20

Nancy Company has budgeted sales of $300,000 with the following budgeted costs:
   Factory overhead:
   Selling and administrative expenses:
   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

Managers have little discretion in setting prices in market situations which are not competitive.

The "plus" relates to the percentage target return on investment in cost-plus pricing.

Companies that produce high quality products do not have to pay attention to the actions of their competitors.

Target pricing is based on

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 operating income?

The target rate of return on investment is the target operating income that an organization must earn divided by invested capital.

What are the Satellite Inc. life cycle budgeted costs?

Which of the following are examples of downstream costs?

In deciding whether to accept a special sales order, any fixed costs that would remain unchanged are considered irrelevant data.

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. -When target costing and target pricing are used together,

The strategy in which companies systematically evaluate all aspects of the value-chain business functions with the objective of reducing costs to meet customers' needs is referred to as

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

Managers have little discretion in setting prices in market situations which are not competitive.

The "plus" relates to the percentage target return on investment in cost-plus pricing.

Companies that produce high quality products do not have to pay attention to the actions of their competitors.

Target pricing is based on

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 operating income?

The target rate of return on investment is the target operating income that an organization must earn divided by invested capital.

What are the Satellite Inc. life cycle budgeted costs?

Which of the following are examples of downstream costs?

In deciding whether to accept a special sales order, any fixed costs that would remain unchanged are considered irrelevant data.

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. -When target costing and target pricing are used together,

The strategy in which companies systematically evaluate all aspects of the value-chain business functions with the objective of reducing costs to meet customers' needs is referred to as

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