Question 1

Dumping is closely related to predatory pricing and occurs when

Accepted Answer

A)  companies get rid of obsolete inventory at prices below cost. 
B)  a business drops a large order at a customer location at a lower price if the customer accepts the order. 
C)  a Canadian company sells its products in another province below the variable cost. 
D)  a foreign company sells goods in Canada at a price below the market value in the home country. 
E)  a Canadian or foreign company sells its products below the variable cost. 
A)  companies get rid of obsolete inventory at prices below cost. 
B)  a business drops a large order at a customer location at a lower price if the customer accepts the order. 
C)  a Canadian company sells its products in another province below the variable cost. 
D)  a foreign company sells goods in Canada at a price below the market value in the home country. 
E)  a Canadian or foreign company sells its products below the variable cost.

Question 2

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 are the target sales revenues?

Accepted Answer

A)  $1,380,000 
B)  $13,800,000 
C)  $11,316,000 
D)  $12,000,000 
E)  $16,284,000 
A)  $1,380,000 
B)  $13,800,000 
C)  $11,316,000 
D)  $12,000,000 
E)  $16,284,000

Question 3

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:
  
-For Welch Manufacturing, what is the minimum acceptable price of this one-time-only special order?

Accepted Answer

A)  $40 
B)  $55 
C)  $60 
D)  $66 
E)  $86 
A)  $40 
B)  $55 
C)  $60 
D)  $66 
E)  $86

Question 4

Eliminating non-value added activities by reducing their cost drivers, is referred to as

Accepted Answer

A)  value-added pricing. 
B)  value-added activity base pricing. 
C)  cost incurrence costing. 
D)  price engineering. 
E)  value engineering. 
A)  value-added pricing. 
B)  value-added activity base pricing. 
C)  cost incurrence costing. 
D)  price engineering. 
E)  value engineering.

Question 5

Upstream costs refer to post-production costs such as after-sales service.

Accepted Answer

A) True 
 B)False

Question 6

When are a product's direct materials cost most likely to be locked in?

Accepted Answer

A)  when the product is designed 
B)  when purchasing commits to buying the materials 
C)  when the bill for the materials is paid 
D)  when the materials are used in production 
E)  when materials are received from the supplier 
A)  when the product is designed 
B)  when purchasing commits to buying the materials 
C)  when the bill for the materials is paid 
D)  when the materials are used in production 
E)  when materials are received from the supplier

Question 7

Do-It Company manufactures sinker molds for fishing. A sinker mold has a price of $7.00, and costs currently assigned to it of $5.44. A competitor is introducing a new sinker mold that will sell for $6.00. Management believes it must lower the price to $6.00 in order to compete in the highly cost-conscious sinker mold market. Marketing believes that the new price will maintain the current sales level. Do-It Company's sales are currently 200,000 molds per year.
Required:
a. What is the target cost for the new price if target profit is 20 percent of sales?
b. What is the target selling price if costs cannot be reduced and target profit is changed to 15 percent of sales?
c. What is the change in operating income for the year if $6.00 is the new price and costs remain the same?
d. What is the target cost per unit if the selling price is reduced to $6.00 and the company wants to maintain its same income level?

Accepted Answer

a. $6.00 - $6.00(0.20) = $4.80

Question 8

Steven Corporation manufactures fishing poles that have a price of $21.00. It has costs of $16.32. A competitor is introducing a new fishing pole that will sell for $18.00. Management believes it must lower the price to $18.00 to compete in the highly cost-conscious fishing pole market. Marketing believes that the new price will maintain the current sales level. Steven Corporation's sales are currently 200,000 poles per year.
Required:
a. What is the target cost for the new price if target operating income is 20% of sales?
b. What is the change in operating income for the year if $18.00 is the new price and costs remain the same?
c. What is the target cost per unit if the selling price is reduced to $18.00 and the company wants to maintain its same income level?

Accepted Answer

a. $18.00 - ($18.00

Question 9

Reuter Avionics currently sells radios for $1,800. It has costs of $1,400. A competitor is bringing a new
radio to market that will sell for $1,600. Management believes it must lower the price to $1,600 to
compete in the market for radios. Marketing believes that the new price will cause sales to increase by
10%, even with a new competitor in the market. Reuter's sales are currently 1,000 radios per year.
Required:
a. What is the target cost if target operating income is 25% of sales?
b. What is the change in operating income if marketing is correct and only the sales price is changed?
c. What is the target cost if the company wants to maintain its same income level, and marketing is correct?

Accepted Answer

a. $1,600 - ($1,600 × 0.25) =

Question 10

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?

Accepted Answer

A)  $800,000 
B)  $960,000 
C)  $1,440,000 
D)  $1,600,000 
E)  $768,000 
A)  $800,000 
B)  $960,000 
C)  $1,440,000 
D)  $1,600,000 
E)  $768,000

Question 11

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 Acorn's target selling price if costs cannot be reduced and target profit is changed cost plus 20 percent?

Accepted Answer

A)  $280.00 
B)  $336.00 
C)  $350.00 
D)  $353.33 
E)  $360.00 
A)  $280.00 
B)  $336.00 
C)  $350.00 
D)  $353.33 
E)  $360.00

Question 12

Customer life-cycle costs

Accepted Answer

A)  are the costs the selling company incurs to satisfy the customer. 
B)  are the costs to the customer of buying and using a product until it is replaced. 
C)  are the same as the selling life-cycle prices. 
D)  are the replacement costs of using a product or service. 
E)  focus on marketing costs. 
A)  are the costs the selling company incurs to satisfy the customer. 
B)  are the costs to the customer of buying and using a product until it is replaced. 
C)  are the same as the selling life-cycle prices. 
D)  are the replacement costs of using a product or service. 
E)  focus on marketing costs.

Question 13

What is the N-C Associates' life-cycle operating income (loss)?

Accepted Answer

A)  $(1,480,000) 
B)  $(1,440,000) 
C)  $(2,080,000) 
D)  $11,200,000 
E)  $5,600,000 
A)  $(1,480,000) 
B)  $(1,440,000) 
C)  $(2,080,000) 
D)  $11,200,000 
E)  $5,600,000

Question 14

Explain the differences between short-run pricing decisions and long-run pricing decisions.

Accepted Answer

Short-run pricing decisions typically ha

Question 15

Kezer Crafts currently sells motor boats for $6,000. It has costs of $4,650. A competitor is bringing a new motor boat to the market that will sell for $5,500. Management believes it must lower the price to $5,500 to compete in the market for motor boats. Marketing believes that the new price will cause sales to increase by 12.5%, even with a new competitor in the market. Kezer Crafts' sales are currently 2,000 motor boats per year.
Required:
a. What is the target cost if target operating income is 25% of sales?
b. What is the change in operating income if marketing is correct and only the sales price is changed?
c. What is the target cost if the company wants to maintain its same income level, and marketing is correct?

Accepted Answer

a. $5,500 - ($5,500 × 0.25) =

Dumping is closely related to predatory pricing and occurs when

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 are the target sales revenues?

Eliminating non-value added activities by reducing their cost drivers, is referred to as

Upstream costs refer to post-production costs such as after-sales service.

When are a product's direct materials cost most likely to be locked in?

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?

Customer life-cycle costs

What is the N-C Associates' life-cycle operating income (loss)?

Explain the differences between short-run pricing decisions and long-run pricing decisions.

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 is closely related to predatory pricing and occurs when

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 are the target sales revenues?

Eliminating non-value added activities by reducing their cost drivers, is referred to as

Upstream costs refer to post-production costs such as after-sales service.

When are a product's direct materials cost most likely to be locked in?

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?

Customer life-cycle costs

What is the N-C Associates' life-cycle operating income (loss)?

Explain the differences between short-run pricing decisions and long-run pricing decisions.

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