Question 1

If one of four distribution channels is discontinued,organisation-sustaining costs such as general administration costs will most likely be reduced by 25%.

Accepted Answer

A) True 
 B)False

Question 2

________ categorises costs related to customers into different cost pools on the basis of either different classes of cost drivers or different degrees of difficulty in determining the cause-and-effect (or benefits-received)relationships.

Accepted Answer

A) Customer revenues 
B) Price discounting 
C) Customer-cost hierarchy 
D) Customer-profitability analysis 
A) Customer revenues 
B) Price discounting 
C) Customer-cost hierarchy 
D) Customer-profitability analysis

Question 3

Managers and management accountants argue that in the long run,customers and products must eventually be profitable on a ________ basis.

Accepted Answer

A) product cost 
B) full-cost 
C) variable cost 
D) fixed cost 
A) product cost 
B) full-cost 
C) variable cost 
D) fixed cost

Question 4

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:
$\begin{array}{lr}
\text {Variable costs:}\
\text { Direct materials } & \$ 30 \
\text { Direct labour } & 10 \
\text { Manufacturing overhead } & 15 \
\text { Marketing costs } & 5\
\text { Fixed costs: }\
\quad \text { Manufacturing overhead } & 100 \
\quad \text { Marketing costs } & \underline{20} \
\text { Total costs } & 180 \
\text { Mark-up }(10 \%) & 18 \
\text { Estimated selling price } & \underline{ \$ 198}
\end{array}$

-Before accepting this one-time-only special order,Geelong Generators wants to know how much profit would be made on the order.

Accepted Answer

A) $0 
B) $1000 
C) Loss of $75 
D) $215 
A) $0 
B) $1000 
C) Loss of $75 
D) $215

Question 5

Answer the following questions using the information below:
Cairns Company has invested $2 000 000 in a plant to make spear guns for fishing.The target operating profit desired from the plant is $300 000 annually.The company plans annual sales of 1500 spear guns at a selling price of $2000 each.
-What is the cost base of each spear gun for Cairns Company?

Accepted Answer

A) $1700 
B) $1802 
C) $1780 
D) $1739 
A) $1700 
B) $1802 
C) $1780 
D) $1739

Question 6

________ is the reporting and analysis of revenues earned from customers and the costs incurred to earn those revenues.

Accepted Answer

A) Profitability analysis 
B) Activity analysis 
C) Customer-profitability analysis 
D) Cost-plus analysis 
A) Profitability analysis 
B) Activity analysis 
C) Customer-profitability analysis 
D) Cost-plus analysis

Question 7

Which of the following reflects price discrimination?

Accepted Answer

A) Charging different prices to different customers or clients for the same products or services 
B) Charging different prices according to quantity amounts 
C) Setting different prices for different products 
D) Using variable costing for some products and full costing for other products when setting prices 
A) Charging different prices to different customers or clients for the same products or services 
B) Charging different prices according to quantity amounts 
C) Setting different prices for different products 
D) Using variable costing for some products and full costing for other products when setting prices

Question 8

Companies should ONLY produce and sell units as long as:

Accepted Answer

A) the revenue from an additional unit exceeds the cost of producing it. 
B) there is customer demand for the product. 
C) there is a generous supply of low-cost direct materials. 
D) the competition allows it. 
A) the revenue from an additional unit exceeds the cost of producing it. 
B) there is customer demand for the product. 
C) there is a generous supply of low-cost direct materials. 
D) the competition allows it.

Question 9

Top management and general administration costs would MOST likely be classified as a:

Accepted Answer

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

Question 10

Which of the following factors should NOT be considered when pricing a special order?

Accepted Answer

A) The incremental cost of one unit of product 
B) Revenues that will be lost on existing sales if prices are lowered 
C) Stable pricing to earn the desired long-run return 
D) The likely bids of competitors 
A) The incremental cost of one unit of product 
B) Revenues that will be lost on existing sales if prices are lowered 
C) Stable pricing to earn the desired long-run return 
D) The likely bids of competitors

Question 11

Suppliers who provide unique products and services (e.g.accountants and management consultants)usually use ________ pricing.

Accepted Answer

A) target 
B) cost-plus 
C) full cost 
D) variable 
A) target 
B) cost-plus 
C) full cost 
D) variable

Question 12

In a one-time-only special order situation,if the price offered by the potential buyer is less than the absorption cost per unit,the producer should not accept the special offer.

Accepted Answer

A) True 
 B)False

Question 13

In markets with little or no competition,the key factor affecting price is costs,not customers' willingness to pay or competitors.

Accepted Answer

A) True 
 B)False

Question 14

To improve customer profitability,companies should:

Accepted Answer

A) strictly enforce their volume-based price discounting policy. 
B) track discounts by sales person. 
C) track discounts by customer. 
D) Both B and C are correct. 
A) strictly enforce their volume-based price discounting policy. 
B) track discounts by sales person. 
C) track discounts by customer. 
D) Both B and C are correct.

Question 15

A customer cost hierarchy categorises costs related to customers into different cost pools on the basis of using only one cost driver.

Accepted Answer

A) True 
 B)False

Question 16

It is possible that the largest customer in terms of revenue is not the most profitable customer.

Accepted Answer

A) True 
 B)False

Question 17

Answer the following questions using the information below:
Bondi Corporation budgeted the following costs for the production of its unicycle for 2017.
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 562500 \
\text { Direct labour } & 390000 \
\text { Manufacturing overhead } & \
\text { Variable } & 420000 \
\text { Fixed } & 322500 \
\text { Selling and administrative } & \
\text { Variable } & 180000 \
\text { Fixed } & \underline{ 240000} \
\text { Total costs } & \underline{ \$ 2115000}
\end{array}$$ Bondi has an annual target operating profit of $450 000.
-The mark-up percentage for setting prices as a percentage of the variable cost of the product is:

Accepted Answer

A) 36% 
B) 228% 
C) 328% 
D) 65% 
A) 36% 
B) 228% 
C) 328% 
D) 65%

Question 18

Companies must always examine pricing decisions through the eyes of their customers.

Accepted Answer

A) True 
 B)False

Question 19

The Cronulla Sea Eagles are evaluating ticket prices for basketball games.Studies show that Friday and Saturday night games average more than twice the fans of games on other days.The following information pertains to the stadium's normal operations per season:
$$\begin{array} { l r l } 
\text { Average fans per game (all games) } & 2500 \text { fans } \
\text { Average fans per Friday and Saturday night games } & 3500 \text { fans } \
\text { Number of home games per season } & 30 \text { games } \
\text { Stadium capacity } & 3500 \text { seats } \
\text { Variable operating costs per operating hour } & \$ 5000 & \
\text { Marketing costs per season for basketball } & \$ 238750 & \
\text { Customer-service costs per season for basketball } & \$ 75000 &
\end{array}$$
The stadium is open for five operating hours on each day a game is played.All employees work by the hour except for the administrators.A maximum of one game is played per day and each fan has only one ticket per game.
The stadium authority wants to charge more for games on Friday and Saturday.What is the minimum price that should be charged for peak attendance nights?

Accepted Answer

A) $10.60 
B) $171.45 
C) $14.19 
D) $6.40 
A) $10.60 
B) $171.45 
C) $14.19 
D) $6.40

Question 20

WA Utility Company charges its high-usage commercial customers a lower rate per kilowatt-hour than other customers.This is an example of:

Accepted Answer

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

If one of four distribution channels is discontinued,organisation-sustaining costs such as general administration costs will most likely be reduced by 25%.

________ categorises costs related to customers into different cost pools on the basis of either different classes of cost drivers or different degrees of difficulty in determining the cause-and-effect (or benefits-received)relationships.

Managers and management accountants argue that in the long run,customers and products must eventually be profitable on a ________ basis.

________ is the reporting and analysis of revenues earned from customers and the costs incurred to earn those revenues.

Which of the following reflects price discrimination?

Companies should ONLY produce and sell units as long as:

Top management and general administration costs would MOST likely be classified as a:

Which of the following factors should NOT be considered when pricing a special order?

Suppliers who provide unique products and services (e.g.accountants and management consultants)usually use ________ pricing.

In a one-time-only special order situation,if the price offered by the potential buyer is less than the absorption cost per unit,the producer should not accept the special offer.

In markets with little or no competition,the key factor affecting price is costs,not customers' willingness to pay or competitors.

To improve customer profitability,companies should:

A customer cost hierarchy categorises costs related to customers into different cost pools on the basis of using only one cost driver.

It is possible that the largest customer in terms of revenue is not the most profitable customer.

Companies must always examine pricing decisions through the eyes of their customers.

WA Utility Company charges its high-usage commercial customers a lower rate per kilowatt-hour than other customers.This is an example of:

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

If one of four distribution channels is discontinued,organisation-sustaining costs such as general administration costs will most likely be reduced by 25%.

________ categorises costs related to customers into different cost pools on the basis of either different classes of cost drivers or different degrees of difficulty in determining the cause-and-effect (or benefits-received)relationships.

Managers and management accountants argue that in the long run,customers and products must eventually be profitable on a ________ basis.

________ is the reporting and analysis of revenues earned from customers and the costs incurred to earn those revenues.

Which of the following reflects price discrimination?

Companies should ONLY produce and sell units as long as:

Top management and general administration costs would MOST likely be classified as a:

Which of the following factors should NOT be considered when pricing a special order?

Suppliers who provide unique products and services (e.g.accountants and management consultants)usually use ________ pricing.

In a one-time-only special order situation,if the price offered by the potential buyer is less than the absorption cost per unit,the producer should not accept the special offer.

In markets with little or no competition,the key factor affecting price is costs,not customers' willingness to pay or competitors.

To improve customer profitability,companies should:

A customer cost hierarchy categorises costs related to customers into different cost pools on the basis of using only one cost driver.

It is possible that the largest customer in terms of revenue is not the most profitable customer.

Companies must always examine pricing decisions through the eyes of their customers.

WA Utility Company charges its high-usage commercial customers a lower rate per kilowatt-hour than other customers.This is an example of:

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