Question 1

A perfect market is characterised by many buyers and many sellers,a homogenous product,zero transaction costs and some other conditions.

Accepted Answer

A) True 
 B)False

Question 2

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 cost base of each juicer machine for Botany Manufacturers?

Accepted Answer

A) $174 
B) $162 
C) $152 
D) $169 
A) $174 
B) $162 
C) $152 
D) $169

Question 3

It is common to find that a small number of customers generate a high percentage of a firm's operating profit.

Accepted Answer

A) True 
 B)False

Question 4

Short run pricing decisions:

Accepted Answer

A) tend to decrease prices when demand is strong. 
B) have a time horizon of more than one year. 
C) use costs that may be irrelevant for long-run pricing decisions. 
D) tend to be more opportunistic than long-run pricing decisions. 
A) tend to decrease prices when demand is strong. 
B) have a time horizon of more than one year. 
C) use costs that may be irrelevant for long-run pricing decisions. 
D) tend to be more opportunistic than long-run pricing decisions.

Question 5

An advantage of using a bar chart to visualise customer profitability is that:

Accepted Answer

A) trends in the volume of purchases become apparent. 
B) loss customers stand out. 
C) differences in commissions paid to sales persons stand out. 
D) All of these answers are correct. 
A) trends in the volume of purchases become apparent. 
B) loss customers stand out. 
C) differences in commissions paid to sales persons stand out. 
D) All of these answers are correct.

Question 6

Managers who want to calculate the ________ costs of serving customers must allocate all corporate,division and distribution-channel costs to customers.

Accepted Answer

A) target 
B) full 
C) corporate 
D) distribution 
A) target 
B) full 
C) corporate 
D) distribution

Question 7

To more accurately assess customer profitability,organisation-sustaining costs should be allocated.

Accepted Answer

A) True 
 B)False

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.
 $$\begin{array} { l r r } 
 & \text { Current } & \text { Projected } \
 \text { Demand }& 20000 \text { urits } & 17500 \text { urits } \
\text { Selling price }& \$ 150 & \$ 165 \
\text { Variable costs per unit } & \$ 100 & \$ 100
\end{array}$$

-Companies that operate in non-competitive environments offering products or services that differ from each other can charge a very high price for their products and services.

Accepted Answer

A) True 
 B)False

Question 9

Handy-Man Services is a repair-service company specialising in small household jobs.Each client pays a fixed monthly service fee based on the number of rooms in the house.Records are kept on the time and material costs used for each repair.The following profitability data apply to five customers:
 $$\begin{array} { l c c } 
& \text { Customer Revenues } & \text { Customer Costs } \
 \text { Marveline Burnett } & \$ 300 & \$ 225 \
\text { J Jackson } & 200 & 305 \
\text { Roger Jones } & 80 & 75 \
\text { Paul Saas } & 75 & 110 \
\text { Becky Stephan } & 350 & 220
\end{array}$$ 
Required:
a.Compute the operating profit for each of the five customers.
b.What options should Handy-Man Services consider in light of the customer-profitability results?
c.What problems might Handy-Man Services encounter in accurately estimating the operating costs of each customer?

Accepted Answer

a. 
b.1.Pay increased attention to the p

Question 10

The cost of producing a product:

Accepted Answer

A) in highly competitive markets controls pricing. 
B) is an important influence on pricing. 
C) affects the willingness of a company to supply a product. 
D) for pricing decisions includes manufacturing costs,but not product design costs. 
A) in highly competitive markets controls pricing. 
B) is an important influence on pricing. 
C) affects the willingness of a company to supply a product. 
D) for pricing decisions includes manufacturing costs,but not product design costs.

Question 11

Costs incurred to process orders would MOST likely be classified as a:

Accepted Answer

A) customer batch-level cost. 
B) customer-sustaining cost. 
C) organisation-sustaining cost. 
D) customer output unit-level cost. 
A) customer batch-level cost. 
B) customer-sustaining cost. 
C) organisation-sustaining cost. 
D) customer output unit-level cost.

Question 12

Why would a manager perform a customer-profitability analysis?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

A customer profitability analysis highli

Question 13

The target-pricing approach reduces the need to go back and forth between prospective cost-plus prices,customer reactions and design modifications.

Accepted Answer

A) True 
 B)False

Question 14

Answer the following questions using the information below:
Acacia Furniture manufactures rustic furniture.The cost accounting system estimates manufacturing costs to be $140 per table,consisting of 60% variable costs and 40% fixed costs.The company has surplus capacity available.It is Acacia Furniture's policy to add a 50% mark-up to full costs.
-A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style.Acacia Furniture is invited to submit a bid to the hotel chain.What per unit price will Acacia Furniture MOST likely bid on this long-term order?

Accepted Answer

A) $108 per unit 
B) $72 per unit 
C) $210 per unit 
D) $140 per unit 
A) $108 per unit 
B) $72 per unit 
C) $210 per unit 
D) $140 per unit

Question 15

Long-run pricing decisions:

Accepted Answer

A) and short-run pricing decisions generally have the same relevant costs. 
B) have a time horizon of less than one year. 
C) include adjusting product mix in a competitive environment. 
D) use prices that include a reasonable return on investment. 
A) and short-run pricing decisions generally have the same relevant costs. 
B) have a time horizon of less than one year. 
C) include adjusting product mix in a competitive environment. 
D) use prices that include a reasonable return on investment.

Question 16

In a competitive market with differentiated products like cameras,what is/are the key factor(s)affecting pricing decisions?

Accepted Answer

A) customer's willingness to pay 
B) cost of producing and delivering the product 
C) the price charged for alternative products 
D) All of these answers are correct. 
A) customer's willingness to pay 
B) cost of producing and delivering the product 
C) the price charged for alternative products 
D) All of these answers are correct.

Question 17

Dropping an unprofitable customer will:

Accepted Answer

A) eliminate most short-run costs assigned to that customer. 
B) increase the potential to cross-sell other products that are more desirable. 
C) decrease long-run profitability. 
D) eliminate long-run costs assigned to that customer. 
A) eliminate most short-run costs assigned to that customer. 
B) increase the potential to cross-sell other products that are more desirable. 
C) decrease long-run profitability. 
D) eliminate long-run costs assigned to that customer.

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:
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 250 \
\text { Direct manufacturing labour } & 80 \
\text { Variable manufacturing support } & 50 \
\text { Fixed manufacturing support } & \underline { 100 } \
{ \text { Total manufacturing costs } } & 480 \
\text { Mark-up (30\%) } & \underline { 144 } \
\text { Estimated selling price } &  \underline {\$ 624}
\end{array}$$
-Before accepting this one-time-only special order,Alice Water Coolers should consider the impact on:

Accepted Answer

A) long-term customers. 
B) competitors. 
C) current plant capacity. 
D) All of these answers are correct. 
A) long-term customers. 
B) competitors. 
C) current plant capacity. 
D) All of these answers are correct.

Question 19

The ________ rate of return on investment leads to the mark-up percentage and the prospective selling price.

Accepted Answer

A) internal 
B) external 
C) target 
D) expected 
A) internal 
B) external 
C) target 
D) expected

Question 20

Which approach reduces the need to go back and forth between prospective cost-plus prices,customer reactions and design modifications?

Accepted Answer

A) Cost-plus 
B) Target-pricing 
C) Full cost 
D) Variable cost 
A) Cost-plus 
B) Target-pricing 
C) Full cost 
D) Variable cost

A perfect market is characterised by many buyers and many sellers,a homogenous product,zero transaction costs and some other conditions.

It is common to find that a small number of customers generate a high percentage of a firm's operating profit.

Short run pricing decisions:

An advantage of using a bar chart to visualise customer profitability is that:

Managers who want to calculate the ________ costs of serving customers must allocate all corporate,division and distribution-channel costs to customers.

To more accurately assess customer profitability,organisation-sustaining costs should be allocated.

The cost of producing a product:

Costs incurred to process orders would MOST likely be classified as a:

Why would a manager perform a customer-profitability analysis? _ _

The target-pricing approach reduces the need to go back and forth between prospective cost-plus prices,customer reactions and design modifications.

Long-run pricing decisions:

In a competitive market with differentiated products like cameras,what is/are the key factor(s)affecting pricing decisions?

Dropping an unprofitable customer will:

The ________ rate of return on investment leads to the mark-up percentage and the prospective selling price.

Which approach reduces the need to go back and forth between prospective cost-plus prices,customer reactions and design modifications?

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

Filters

Exam 9: Pricing and Customer Profitability

A perfect market is characterised by many buyers and many sellers,a homogenous product,zero transaction costs and some other conditions.

It is common to find that a small number of customers generate a high percentage of a firm's operating profit.

Short run pricing decisions:

An advantage of using a bar chart to visualise customer profitability is that:

Managers who want to calculate the ________ costs of serving customers must allocate all corporate,division and distribution-channel costs to customers.

To more accurately assess customer profitability,organisation-sustaining costs should be allocated.

The cost of producing a product:

Costs incurred to process orders would MOST likely be classified as a:

Why would a manager perform a customer-profitability analysis? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The target-pricing approach reduces the need to go back and forth between prospective cost-plus prices,customer reactions and design modifications.

Long-run pricing decisions:

In a competitive market with differentiated products like cameras,what is/are the key factor(s)affecting pricing decisions?

Dropping an unprofitable customer will:

The ________ rate of return on investment leads to the mark-up percentage and the prospective selling price.

Which approach reduces the need to go back and forth between prospective cost-plus prices,customer reactions and design modifications?

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

Filters

Why would a manager perform a customer-profitability analysis? _ _