Question 1

Collusive pricing occurs when

Accepted Answer

A) a company wants two products to sell for the same,or almost the same,amount. 
B) a company wants a product to sell for the same as a competitor's product. 
C) two or more companies agree to sell a product at a price higher than should be expected. 
D) competitors are part of the same large parent organization. 
E) one large company dominates an industry. 
A) a company wants two products to sell for the same,or almost the same,amount. 
B) a company wants a product to sell for the same as a competitor's product. 
C) two or more companies agree to sell a product at a price higher than should be expected. 
D) competitors are part of the same large parent organization. 
E) one large company dominates an industry.

Question 2

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 3

When target costing and target pricing are used together

Accepted Answer

A) the target cost is established first,then the target price. 
B) the target cost per unit is the estimated long-run price per unit that enables a product or service to achieve the target profit per unit. 
C) the target price is set to undercut the competition. 
D) target costs are higher than current costs because of inflation over time. 
E) target price is the estimated price for a product or service that a potential customer will be willing to pay. 
A) the target cost is established first,then the target price. 
B) the target cost per unit is the estimated long-run price per unit that enables a product or service to achieve the target profit per unit. 
C) the target price is set to undercut the competition. 
D) target costs are higher than current costs because of inflation over time. 
E) target price is the estimated price for a product or service that a potential customer will be willing to pay.

Question 4

Use the information below to answer the following question(s).
Acorn Products currently sells small boats for $360.It has costs currently assigned to it of $280.A competitor is bringing a new small boat to market that will sell for $300.Management believes it must lower the price to $300 to compete in the market for small boats.Marketing believes that the new price will cause sales to increase by 10 percent,even with a new competitor in the market.Acorn's sales are currently 100,000 per year.
-What is the target cost if target profit is 25 percent of the competitor's selling price?

Accepted Answer

A) $75 
B) $90 
C) $225 
D) $270 
E) $280 
A) $75 
B) $90 
C) $225 
D) $270 
E) $280

Question 5

What is the primary reason a firm would adopt target costing?

Accepted Answer

The primary reason a firm would adopt ta

Question 6

Use the information below to answer the following question(s).
Ferryman Products manufactures coffee tables.Ferryman Products has a policy of adding a 20% markup to full costs and currently has excess capacity.The following information pertains to the company's normal operations per month:
  
-What is the Ferryman Products full product cost for long-run pricing purposes?

Accepted Answer

A) $134.75 
B) $242.25 
C) $262.25 
D) $122.75 
E) $222.25 
A) $134.75 
B) $242.25 
C) $262.25 
D) $122.75 
E) $222.25

Question 7

Answer the following question(s)using the information below.
Frank's Computer Monitors Inc..currently sells 17" monitors for $270.It has costs of $210.A competitor is bringing a new 17" monitor to market that will sell for $225.Management believes it must lower the price to $225 to compete in the market for 17" monitors.Marketing believes that the new price will cause sales to increase by 10%,even with a new competitor in the market.Frank's sales are currently 10,000 monitors per year.
-What is the change in operating income if marketing is correct and only the sales price is changed?

Accepted Answer

A) $1,421,250 
B) $(204,000) 
C) $(352,500) 
D) $(435,000) 
E) $18,750 
A) $1,421,250 
B) $(204,000) 
C) $(352,500) 
D) $(435,000) 
E) $18,750

Question 8

The target pricing approach is easier when

Accepted Answer

A) products highly differentiated and the consumer life cycle is shorter. 
B) products highly differentiated and the consumer life cycle is longer. 
C) products are not well differentiated and the consumer life cycle is shorter. 
D) products are not well differentiated and the consumer life cycle is longer. 
E) little is known about market factors. 
A) products highly differentiated and the consumer life cycle is shorter. 
B) products highly differentiated and the consumer life cycle is longer. 
C) products are not well differentiated and the consumer life cycle is shorter. 
D) products are not well differentiated and the consumer life cycle is longer. 
E) little is known about market factors.

Question 9

For setting long-term prices a company should use full product costs.Full product costs for pricing purposes

Accepted Answer

A) include direct costs only. 
B) include all manufacturing costs only. 
C) does not include fixed overhead. 
D) equals manufacturing and selling costs. 
E) include all direct costs plus an appropriate allocation of the indirect costs of all business functions. 
A) include direct costs only. 
B) include all manufacturing costs only. 
C) does not include fixed overhead. 
D) equals manufacturing and selling costs. 
E) include all direct costs plus an appropriate allocation of the indirect costs of all business functions.

Question 10

A company uses a long-run time horizon to price its product,an electronic component used in aircraft.To produce a normal production run for a year of 100,000 units direct materials are $90,000;direct labour is $180,000;and,rent on leased equipment is $106,000 per year.Currently re-work is running at 4% of production,after testing.The company has the capacity to test 10 units per hour.Manufacturing Overhead has two cost drivers: testing (cost driver is testing hours at $2.50 per hour);and,rework (cost driver is units reworked at $80 per unit re-worked).
Calculate current total manufacturing costs for 100,000 units.

Accepted Answer

A) $320,000 
B) $376,000 
C) $396,000 
D) $401,000 
E) $721,000 
A) $320,000 
B) $376,000 
C) $396,000 
D) $401,000 
E) $721,000

Question 11

Answer the following question(s)using the information below.
Rogers' Heaters is approached by Ms.Yukki,a new customer,to fulfill a large one-time-only special order for a product similar to one offered to regular customers.Rogers' Heaters has excess capacity.The following per unit data apply for sales to regular customers:
  
-For Rogers' Heaters,what is the minimum acceptable price of this one-time-only special order?

Accepted Answer

A) $290 
B) $390 
C) $260 
D) $507 
E) $377 
A) $290 
B) $390 
C) $260 
D) $507 
E) $377

Question 12

Answer the following question(s)using the information below.
Gerry's Generator Supply is approached by Mr.Gladstone,a new customer,to fulfill a large one-time-only special order for a product similar to one offered to regular customers.Gerry's Generator Supply has excess capacity.The following per unit data apply for sales to regular customers:
  
-If Mr.Gladstone wanted a long-term commitment for supplying this product,what price would most likely be quoted to him?

Accepted Answer

A) $1,000 
B) $1,200 
C) $1,290 
D) $1,400 
E) $1,075 
A) $1,000 
B) $1,200 
C) $1,290 
D) $1,400 
E) $1,075

Question 13

Relevant costs for pricing decisions include manufacturing costs,but not costs from other value-chain functions.

Accepted Answer

A) True 
 B)False

Question 14

Answer the following question(s)using the information below.
After conducting a market research study,Schultz Manufacturing decided to produce a new interior door to complement its exterior door line.It is estimated that the new interior door can be sold at a target price of $60.The annual target sales volume for interior doors is 20,000.Schultz has target operating income of 20% of sales.
-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 15

Answer the following question(s)using the information below.
After conducting a market research study,Potter Products decided to produce an electric coffee pot to complement its line of kitchen products.It is estimated that the new coffee pot can be sold at a target price of $46.The annual target sales volume for the coffee pot is 300,000.Potter has target operating income of 18% of sales.
-What is the total target cost?

Accepted Answer

A) $9,840,000 
B) $11,316,000 
C) $13,352,000 
D) $9,279,120 
E) $1,131,600 
A) $9,840,000 
B) $11,316,000 
C) $13,352,000 
D) $9,279,120 
E) $1,131,600

Question 16

Frost Inc.has budgeted sales of $150,000 with the following budgeted costs:
   
Compute the target profit percentage for setting prices as a percentage of:
a.Total costs
b.Total variable costs
c.Variable manufacturing costs
d.Total manufacturing costs

Accepted Answer

a.$31,500 + $20,500 + $18,500 + $28,000

Question 17

Which of the following is NOT a benefit of life cycle reporting?

Accepted Answer

A) The full set of revenues associated with each product becomes visible. 
B) The full set of costs associated with each product becomes visible. 
C) The differences between products in the percentage of their total costs incurred at earl stages in the life cycle are highlighted. 
D) Upstream costs,such as R & D,are the only costs that need to be added in when a life cycle report is complete. 
E) Interrelationships among business function cost categories are highlighted. 
A) The full set of revenues associated with each product becomes visible. 
B) The full set of costs associated with each product becomes visible. 
C) The differences between products in the percentage of their total costs incurred at earl stages in the life cycle are highlighted. 
D) Upstream costs,such as R & D,are the only costs that need to be added in when a life cycle report is complete. 
E) Interrelationships among business function cost categories are highlighted.

Question 18

Use the information below to answer the following question(s).
Block Island TV currently sells large televisions for $360.It has costs of $280.A competitor is bringing a new large television to market that will sell for $300.Management believes it must lower the price to $300 to compete in the market for large televisions.Marketing believes that the new price will cause sales to increase by 10%,even with a new competitor in the market.Block Island TV sales are currently 100,000 televisions per year.
-What is the target cost if the company wants to maintain its same income level,and marketing is correct (rounded to the nearest cent)?

Accepted Answer

A) $225.00 
B) $227.27 
C) $246.68 
D) $280.00 
E) $270 
A) $225.00 
B) $227.27 
C) $246.68 
D) $280.00 
E) $270

Question 19

A product's markup percentage would need to cover fixed manufacturing costs if

Accepted Answer

A) the company has only fixed manufacturing costs. 
B) the company wants to break-even during the fiscal period. 
C) the company wants to make a profit. 
D) the cost base does not include fixed manufacturing costs. 
E) the cost base includes fixed manufacturing costs as well as variable costs. 
A) the company has only fixed manufacturing costs. 
B) the company wants to break-even during the fiscal period. 
C) the company wants to make a profit. 
D) the cost base does not include fixed manufacturing costs. 
E) the cost base includes fixed manufacturing costs as well as variable costs.

Question 20

Hitz Video Rental 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:
   
Required:
What is the unit cost when establishing a long-run price for rentals?

Accepted Answer

The answer of Hitz Video Rental is evaluating rental prices.Historical...

Collusive pricing occurs when

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

When target costing and target pricing are used together

What is the primary reason a firm would adopt target costing?

The target pricing approach is easier when

For setting long-term prices a company should use full product costs.Full product costs for pricing purposes

Relevant costs for pricing decisions include manufacturing costs,but not costs from other value-chain functions.

Frost Inc.has budgeted sales of $150,000 with the following budgeted costs: Compute the target profit percentage for setting prices as a percentage of: a.Total costs b.Total variable costs c.Variable manufacturing costs d.Total manufacturing costs

Which of the following is NOT a benefit of life cycle reporting?

A product's markup percentage would need to cover fixed manufacturing costs if

Hitz Video Rental 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: Required: What is the unit cost when establishing a long-run price for rentals?

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

Analysis of Cost Behaviour

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

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 12: Pricing Decisions, product Profitability Decisions, and Cost Management

Collusive pricing occurs when

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

When target costing and target pricing are used together

What is the primary reason a firm would adopt target costing?

The target pricing approach is easier when

For setting long-term prices a company should use full product costs.Full product costs for pricing purposes

Relevant costs for pricing decisions include manufacturing costs,but not costs from other value-chain functions.

Frost Inc.has budgeted sales of $150,000 with the following budgeted costs: Compute the target profit percentage for setting prices as a percentage of: a.Total costs b.Total variable costs c.Variable manufacturing costs d.Total manufacturing costs

Which of the following is NOT a benefit of life cycle reporting?

A product's markup percentage would need to cover fixed manufacturing costs if

Hitz Video Rental 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: Required: What is the unit cost when establishing a long-run price for rentals?

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

Analysis of Cost Behaviour

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

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters