Plaza Video Rentals is evaluating rental prices.Historical data show that Friday and Saturday have twice the rentals of other days of the week.The following information pertains to the store's normal operations per week: \[\begin{array} { l r } \text { Average rentals per day on Friday and Saturday } & 1150 \\ \text { Average rentals per day on Sunday through Thursday } & 500 \\ \text { Store hours per day } & 12 \\ \text { Total units available for rent } & 10000 \\ & \\ \text { Variable operating costs per hour } & \$ 40 \\ \text { Marketing costs per week } & \$ 1500 \\ \text { Customer service costs per week } & \$ 250 \end{array}\] The store manager wants to charge more for rentals on Friday and Saturday.What is the minimum price that should be charged during peak rental days?

A) $0.60 B) $0.90 C) $0.83 D) $1.07 A) $0.60 B) $0.90 C) $0.83 D) $1.07 D

Answer the following questions using the information below: Rockhampton Manufacturing is approached by a Brazilian customer to fulfil a one-time-only special order for a product similar to one offered to domestic customers. Rockhampton Manufacturing has a policy of adding a 10% mark-up to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers: $\begin{array}{lr} \text {Variable costs:}\\ \text { Direct materials } & \$ 30 \\ \text { Direct labour } & 10 \\ \text { Manufacturing overhead } & 15 \\ \text { Marketing costs } & 5\\ \text { Fixed costs: }\\ \quad \text { Manufacturing overhead } & 100 \\ \quad \text { Marketing costs } & \underline{20} \\ \text { Total costs } & 180 \\ \text { Mark-up }(10 \%) & 18 \\ \text { Estimated selling price } & \underline{ \$ 198} \end{array}$ -For Geelong Generators,what is the minimum acceptable price of this one-time-only special order?

A) $1075 B) $1000 C) $1290 D) $900 A) $1075 B) $1000 C) $1290 D) $900

Answer the following questions using the information below: Ozfone manufactures high-tech mobile phones.Ozfone has a policy of adding a 30% mark-up to full costs and currently has excess capacity.The following information pertains to the company's normal operations per month: \[\begin{array} { l r l } \text { Output units } & 20000 \text { phones } \\ \text { Machine-hours } & 8000 \text { hours } \\ \text { Direct manufacturing labour-hours } & 5000 \text { hours } \\ & \\ \text { Direct materials per unit } & \$ 25 \\ \text { Direct manufacturing labour per hour } & \$ 20 \\ \text { Variable manufacturing overhead costs } & \$ 175000 \\ \text { Fixed manufacturing overhead costs } & \$ 425000 \\ \text { Product and process design costs } & \$ 400000 \\ \text { Marketing and distribution costs } & \$ 475000 \end{array}\] -For long-run pricing of the mobile phones,what price will MOST likely be used by Ozfone?

A) $65.00 B) $92.50 C) $180.00 D) $134.88 A) $65.00 B) $92.50 C) $180.00 D) $134.88

Answer the following questions using the information below: Rockhampton Manufacturing is approached by a Brazilian customer to fulfil a one-time-only special order for a product similar to one offered to domestic customers. Rockhampton Manufacturing has a policy of adding a 10% mark-up to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers: $\begin{array}{lr} \text {Variable costs:}\\ \text { Direct materials } & \$ 30 \\ \text { Direct labour } & 10 \\ \text { Manufacturing overhead } & 15 \\ \text { Marketing costs } & 5\\ \text { Fixed costs: }\\ \quad \text { Manufacturing overhead } & 100 \\ \quad \text { Marketing costs } & \underline{20} \\ \text { Total costs } & 180 \\ \text { Mark-up }(10 \%) & 18 \\ \text { Estimated selling price } & \underline{ \$ 198} \end{array}$ -What is the full cost of the product per unit?

A) $66 B) $180 C) $60 D) $198 A) $66 B) $180 C) $60 D) $198

Answer the following questions using the information below: Alice Water Coolers is approached by Mrs Hu Qi,a new customer,to fulfil a large one-time-only special order for a product similar to one offered to regular customers.Alice Water Coolers has excess capacity.The following per unit data apply for sales to regular customers: \[\begin{array} { l r } \text { Direct materials } & \$ 250 \\ \text { Direct manufacturing labour } & 80 \\ \text { Variable manufacturing support } & 50 \\ \text { Fixed manufacturing support } & \underline { 100 } \\ { \text { Total manufacturing costs } } & 480 \\ \text { Mark-up (30\%) } & \underline { 144 } \\ \text { Estimated selling price } & \underline {\$ 624} \end{array}\] -If Mrs Hu Qi wanted a long-term commitment for supplying this product,what price would MOST likely be quoted to her?

A) $330 B) $380 C) $480 D) $624 A) $330 B) $380 C) $480 D) $624

Exam 9: Pricing and Customer Profitability

Answer the following questions using the information below: Gold Coast Freshair (GCF)manufactures single room-sized air conditioners.The cost accounting system estimates manufacturing costs to be $120 per air conditioner,consisting of 75% variable costs and 25% fixed costs.The company has surplus capacity available.It is GCF's policy to add a 40% mark-up to full costs. -A medium-sized motel chain is currently expanding and has decided to create more rooms and air condition all of its rooms,which are currently not air conditioned.GCF is invited to submit a bid to the motel chain.What per unit price will GCF MOST likely bid for this special order of 50 units?

Free

(Multiple Choice)

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(84)

Question 1

Correct Answer:

Verified

C

The higher the likely growth of a customer's sales,the more valuable the customer.

Free

(True/False)

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(89)

Question 2

Correct Answer:

Verified

True

Plaza Video Rentals is evaluating rental prices.Historical data show that Friday and Saturday have twice the rentals of other days of the week.The following information pertains to the store's normal operations per week: Average rentals per day on Friday and Saturday 1150 Average rentals per day on Sunday through Thursday 500 Store hours per day 12 Total units available for rent 10000 Variable operating costs per hour \ 40 Marketing costs per week \ 1500 Customer service costs per week \ 250 The store manager wants to charge more for rentals on Friday and Saturday.What is the minimum price that should be charged during peak rental days?

Free

(Multiple Choice)

4.8/5

(79)

Question 3

Correct Answer:

Verified

D

The cost of visiting customers is an example of a customer output unit-level cost.

(True/False)

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(98)

Question 4

When the firm uses the target-costing approach to pricing,the target cost per unit is the difference between the per unit target price and the per unit target:

(Multiple Choice)

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(74)

Question 5

Surveys indicate that most managers do not use the full cost of the product for their cost-based pricing decisions.

(True/False)

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(78)

Question 6

The 'time and materials method' is a market-based pricing method.

(True/False)

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(77)

Question 7

Profit margins are often set to earn a reasonable return on investment for short run pricing decisions,but not long-run pricing decisions.

(True/False)

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Question 8

Answer the following questions using the information below: LeBlanc Lighting manufactures table lamps and is considering raising the price by $15 a unit for the coming year.With a $15 price increase,demand is expected to fall by 2500 units. Current Projected Demand 20000 urits 17500 urits Selling price \ 150 \ 165 Variable costs per unit \ 100 \ 100 -'Peak-load pricing' is a form of price discrimination and is illegal.

(True/False)

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(82)

Question 9

Companies try to keep their best customers happy in a number of ways,including special phone numbers and upgrade privileges for elite-level frequent flyers and free usage of luxury hotel suites and big credit limits for high-rollers at casinos.

(True/False)

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(88)

Question 10

Answer the following questions using the information below: Rockhampton Manufacturing is approached by a Brazilian customer to fulfil a one-time-only special order for a product similar to one offered to domestic customers. Rockhampton Manufacturing has a policy of adding a 10% mark-up to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers: Variable costs: Direct materials \ 30 Direct labour 10 Manufacturing overhead 15 Marketing costs 5 Fixed costs: Manufacturing overhead 100 Marketing costs Total costs 180 Mark-up (10\%) 18 Estimated selling price -For Geelong Generators,what is the minimum acceptable price of this one-time-only special order?

(Multiple Choice)

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(62)

Question 11

Customer-________ activities related to a group of units (computers)sold to a customer;for example,process a sales order or make a delivery.

(Multiple Choice)

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(88)

Question 12

Answer the following questions using the information below: Ozfone manufactures high-tech mobile phones.Ozfone has a policy of adding a 30% mark-up to full costs and currently has excess capacity.The following information pertains to the company's normal operations per month: Output units 20000 phones Machine-hours 8000 hours Direct manufacturing labour-hours 5000 hours Direct materials per unit \ 25 Direct manufacturing labour per hour \ 20 Variable manufacturing overhead costs \ 175000 Fixed manufacturing overhead costs \ 425000 Product and process design costs \ 400000 Marketing and distribution costs \ 475000 -For long-run pricing of the mobile phones,what price will MOST likely be used by Ozfone?

(Multiple Choice)

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(78)

Question 13

Answer the following questions using the information below: Botany Manufacturers has invested $1 000 000 in a plant to make commercial juicer machines.The target operating profit desired from the plant is $180 000 annually.The company plans annual sales of 7000 juicer machines at a selling price of $200 each. -What is the mark-up percentage as a percentage of cost for Botany Manufacturers?

(Multiple Choice)

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(77)

Question 14

'Dumping' and 'predatory' pricing are the same.

(True/False)

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(75)

Question 15

Answer the following questions using the information below: Rockhampton Manufacturing is approached by a Brazilian customer to fulfil a one-time-only special order for a product similar to one offered to domestic customers. Rockhampton Manufacturing has a policy of adding a 10% mark-up to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers: Variable costs: Direct materials \ 30 Direct labour 10 Manufacturing overhead 15 Marketing costs 5 Fixed costs: Manufacturing overhead 100 Marketing costs Total costs 180 Mark-up (10\%) 18 Estimated selling price -What is the full cost of the product per unit?

(Multiple Choice)

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(71)

Question 16

Which of the following starts with estimated product costs and next adds desired operating profit?

(Multiple Choice)

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Question 17

The allocation of organisation-sustaining costs is useful for:

(Multiple Choice)

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(84)

Question 18

Answer the following questions using the information below: Alice Water Coolers is approached by Mrs Hu Qi,a new customer,to fulfil a large one-time-only special order for a product similar to one offered to regular customers.Alice Water Coolers has excess capacity.The following per unit data apply for sales to regular customers: Direct materials \ 250 Direct manufacturing labour 80 Variable manufacturing support 50 Fixed manufacturing support Total manufacturing costs 480 Mark-up (30\%) Estimated selling price -If Mrs Hu Qi wanted a long-term commitment for supplying this product,what price would MOST likely be quoted to her?

(Multiple Choice)

4.8/5

(73)

Question 19

Answer the following questions using the information below: Botany Manufacturers has invested $1 000 000 in a plant to make commercial juicer machines.The target operating profit desired from the plant is $180 000 annually.The company plans annual sales of 7000 juicer machines at a selling price of $200 each. -What is the target rate of return on investment for Botany Manufacturers?

(Multiple Choice)

4.7/5

(89)

Question 20

The higher the likely growth of a customer's sales,the more valuable the customer.

The cost of visiting customers is an example of a customer output unit-level cost.

When the firm uses the target-costing approach to pricing,the target cost per unit is the difference between the per unit target price and the per unit target:

Surveys indicate that most managers do not use the full cost of the product for their cost-based pricing decisions.

The 'time and materials method' is a market-based pricing method.

Profit margins are often set to earn a reasonable return on investment for short run pricing decisions,but not long-run pricing decisions.

Companies try to keep their best customers happy in a number of ways,including special phone numbers and upgrade privileges for elite-level frequent flyers and free usage of luxury hotel suites and big credit limits for high-rollers at casinos.

Customer-________ activities related to a group of units (computers)sold to a customer;for example,process a sales order or make a delivery.

'Dumping' and 'predatory' pricing are the same.

Which of the following starts with estimated product costs and next adds desired operating profit?

The allocation of organisation-sustaining costs is useful for:

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Measuring and Reporting Sustainability

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