Question 1

A customer cost hierarchy categorises costs related to customers into different cost pools on the basis of different:

Accepted Answer

A) types of cost drivers. 
B) levels of cause-and-effect relationships. 
C) benefits-received relationships. 
D) All of these answers are correct. 
A) types of cost drivers. 
B) levels of cause-and-effect relationships. 
C) benefits-received relationships. 
D) All of these answers are correct.

Question 2

'Reverse engineering' involves disassembling and analysing competitors' products to determine product designs and materials and to become acquainted with the technologies that competitors use.

Accepted Answer

A) True 
 B)False

Question 3

Bid prices and costs that are relevant for regular orders are the same costs that are relevant for one-time-only special orders.

Accepted Answer

A) True 
 B)False

Question 4

Companies must ALWAYS examine their pricing:

Accepted Answer

A) based on the supply of the product. 
B) through the eyes of their competitors. 
C) based on the cost of producing the product. 
D) through the eyes of their customers. 
A) based on the supply of the product. 
B) through the eyes of their competitors. 
C) based on the cost of producing the product. 
D) through the eyes of their customers.

Question 5

Relative to cost-plus pricing,target pricing first determines product characteristics and target price on the basis of customer preferences and expected competitor responses,and then a target cost.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is FALSE regarding cost-plus pricing?

Accepted Answer

A) The selling price computed is only a prospective price. 
B) A company uses a mark-up percentage that estimates a product price that covers full product costs and earns the required return on investment. 
C) A company selects a cost base that it regards as reliable. 
D) The cost-plus price chosen has already been studied for customer reaction to the price. 
A) The selling price computed is only a prospective price. 
B) A company uses a mark-up percentage that estimates a product price that covers full product costs and earns the required return on investment. 
C) A company selects a cost base that it regards as reliable. 
D) The cost-plus price chosen has already been studied for customer reaction to the price.

Question 7

The cost of visiting customers would MOST likely be classified as a:

Accepted Answer

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

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

-Would you recommend the $15 price increase?

Accepted Answer

A) No,because demand decreased. 
B) Yes,because contribution margin per unit increases. 
C) No,because the selling price increases. 
D) Yes,because operating profit increases. 
A) No,because demand decreased. 
B) Yes,because contribution margin per unit increases. 
C) No,because the selling price increases. 
D) Yes,because operating profit increases.

Question 9

Other factors that managers should consider in deciding how to allocate resources among customers include the:

Accepted Answer

A) likelihood of customer retention. 
B) ability to learn from customers. 
C) potential for sales growth. 
D) long-run customer profitability. 
E) All of these are correct. 
A) likelihood of customer retention. 
B) ability to learn from customers. 
C) potential for sales growth. 
D) long-run customer profitability. 
E) All of these are correct.

Question 10

Too high a price may:

Accepted Answer

A) indicate supply is too plentiful. 
B) deter a customer from purchasing a product. 
C) increase demand for the product. 
D) decrease a competitor's market share. 
A) indicate supply is too plentiful. 
B) deter a customer from purchasing a product. 
C) increase demand for the product. 
D) decrease a competitor's market share.

Question 11

Customers making large contributions to the profitability of the company should:

Accepted Answer

A) not be offered the volume-based price discounts offered to less profitable customers. 
B) receive a higher level of attention from the company than less profitable customers. 
C) be charged higher prices for the same products than less profitable customers. 
D) be treated the same as other customers because all customers are important. 
A) not be offered the volume-based price discounts offered to less profitable customers. 
B) receive a higher level of attention from the company than less profitable customers. 
C) be charged higher prices for the same products than less profitable customers. 
D) be treated the same as other customers because all customers are important.

Question 12

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 target rate of return on investment for Cairns Company?

Accepted Answer

A) 15.0% 
B) 11.1% 
C) 17.6% 
D) 10.0% 
A) 15.0% 
B) 11.1% 
C) 17.6% 
D) 10.0%

Question 13

Full costs of a product include variable costs,but not fixed costs.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) full cost 
B) variable cost 
C) target-pricing 
D) fixed cost 
A) full cost 
B) variable cost 
C) target-pricing 
D) fixed cost

Question 15

When organisation-sustaining costs are fully allocated to distribution channels,then the sum of the distribution-channel operating profits is:

Accepted Answer

A) greater than company-wide operating profit. 
B) equal to company-wide operating profit. 
C) less than company-wide operating profit. 
D) indeterminable. 
A) greater than company-wide operating profit. 
B) equal to company-wide operating profit. 
C) less than company-wide operating profit. 
D) indeterminable.

Question 16

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 variable manufacturing costs is:

Accepted Answer

A) 122% 
B) 87% 
C) 169% 
D) 54% 
A) 122% 
B) 87% 
C) 169% 
D) 54%

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Coffs Harbour Company has budgeted sales of $400 000 with the following budgeted costs:
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 60000 \
\text { Direct manufacturing labour } & 40000 \
\text { Factory overhead } & \
\quad \text { Variable } & 30000 \
\quad \text { Fixed } & 50000 \
\text { Selling and administrative expenses } & \
\quad \text { Variable } & 20000 \
\quad \text { Fixed } & 30000
\end{array}$$ 
Compute the average mark-up 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

Question 19

Different categories of customers are willing to pay different prices for services depending on their circumstances.

Accepted Answer

A) True 
 B)False

Question 20

Price fixing is allowed in Australia.

Accepted Answer

A) True 
 B)False

A customer cost hierarchy categorises costs related to customers into different cost pools on the basis of different:

'Reverse engineering' involves disassembling and analysing competitors' products to determine product designs and materials and to become acquainted with the technologies that competitors use.

Bid prices and costs that are relevant for regular orders are the same costs that are relevant for one-time-only special orders.

Companies must ALWAYS examine their pricing:

Relative to cost-plus pricing,target pricing first determines product characteristics and target price on the basis of customer preferences and expected competitor responses,and then a target cost.

Which of the following statements is FALSE regarding cost-plus pricing?

The cost of visiting customers would MOST likely be classified as a:

Other factors that managers should consider in deciding how to allocate resources among customers include the:

Too high a price may:

Customers making large contributions to the profitability of the company should:

Full costs of a product include variable costs,but not fixed costs.

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

When organisation-sustaining costs are fully allocated to distribution channels,then the sum of the distribution-channel operating profits is:

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

Different categories of customers are willing to pay different prices for services depending on their circumstances.

Price fixing is allowed in Australia.

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 customer cost hierarchy categorises costs related to customers into different cost pools on the basis of different:

'Reverse engineering' involves disassembling and analysing competitors' products to determine product designs and materials and to become acquainted with the technologies that competitors use.

Bid prices and costs that are relevant for regular orders are the same costs that are relevant for one-time-only special orders.

Companies must ALWAYS examine their pricing:

Relative to cost-plus pricing,target pricing first determines product characteristics and target price on the basis of customer preferences and expected competitor responses,and then a target cost.

Which of the following statements is FALSE regarding cost-plus pricing?

The cost of visiting customers would MOST likely be classified as a:

Other factors that managers should consider in deciding how to allocate resources among customers include the:

Too high a price may:

Customers making large contributions to the profitability of the company should:

Full costs of a product include variable costs,but not fixed costs.

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

When organisation-sustaining costs are fully allocated to distribution channels,then the sum of the distribution-channel operating profits is:

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

Different categories of customers are willing to pay different prices for services depending on their circumstances.

Price fixing is allowed in Australia.

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