Question 1

Target pricing is based on

Accepted Answer

A) engineered cost. 
B) variable manufacturing and nonmanufacturing costs. 
C) full product cost. 
D) what customers are willing to pay. 
E) full manufacturing cost. 
A) engineered cost. 
B) variable manufacturing and nonmanufacturing costs. 
C) full product cost. 
D) what customers are willing to pay. 
E) full manufacturing cost.

Question 2

Long-run pricing is a strategic decision designed to build long-run relationships with customers in competitive markets.

Accepted Answer

A) True 
 B)False

Question 3

At a management meeting,you just finished presenting your cost analysis report,showing unit costs last year for 60,000 widgets produced were $435.00.The sales manager then complained that she was going to lose a special overseas sale because the customer had indicated they could only pay $425.00.She knew from sources that no competitor would be bidding below $440,and she complained that if the company had better cost control,there would be more profit for everyone.The production manager also would like to take the extra job,since even with the extra production,the plant would be under-capacity.
Required:What type of information would you need in order to be able to determine if the extra order could be profitably produced if the selling price was held to $425 per unit?

Accepted Answer

Unit costs are often misleading,usually

Question 4

Which of the following is TRUE of products with a long life cycle?

Accepted Answer

A) Their costs are more difficult to manage,early in their life cycle. 
B) It is not as important to have accurate predictions of revenues. 
C) They highlight the interrelationships with other parts of the life cycle. 
D) They are highly visible and therefore must be carefully controlled. 
E) A smaller fraction of the total life costs are actually incurred at the time when costs are locked-in. 
A) Their costs are more difficult to manage,early in their life cycle. 
B) It is not as important to have accurate predictions of revenues. 
C) They highlight the interrelationships with other parts of the life cycle. 
D) They are highly visible and therefore must be carefully controlled. 
E) A smaller fraction of the total life costs are actually incurred at the time when costs are locked-in.

Question 5

Survey evidence suggest that most companies use which type of cost when making pricing decisions?

Accepted Answer

A) cost-plus 
B) absorption product costing 
C) variable product costs 
D) variable manufacturing costs 
E) manufacturing function costs 
A) cost-plus 
B) absorption product costing 
C) variable product costs 
D) variable manufacturing costs 
E) manufacturing function costs

Question 6

The controller and sales manager are at odds over the pricing of a new product.What major influences should be considered in pricing the new product? Discuss each briefly.

Accepted Answer

The major influences are customers,compe

Question 7

Steven Corporation manufactures fishing poles that have a price of $21.00.It has costs of $16.32.A competitor is introducing a new fishing pole that will sell for $18.00.Management believes it must lower the price to $18.00 to compete in the highly cost-conscious fishing pole market.Marketing believes that the new price will maintain the current sales level.Steven Corporation's sales are currently 200,000 poles per year.
Required:
a.What is the target cost for the new price if target operating income is 20% of sales?
b.What is the change in operating income for the year if $18.00 is the new price and costs remain the same?
c.What is the target cost per unit if the selling price is reduced to $18.00 and the company wants to maintain its same income level?

Accepted Answer

a.$18.00 -

Question 8

Timothy Company has budgeted sales of $780,000 with the following budgeted costs:
   
Compute the average markup percentage for setting prices as a percentage of:
a.Total manufacturing costs
b.The variable cost of the product
c.The full cost of the product
d.Variable manufacturing costs

Accepted Answer

a.$168,000 + $132,000 + $96,000 + $108,0

Question 9

Which of the following is TRUE concerning value-engineering?

Accepted Answer

A) The goal of value-engineering is to eliminate locked-in costs. 
B) After a product's design has been value-engineered,costs are difficult to influence. 
C) When and how costs are locked in are more important than when and how costs are incurred. 
D) Value-engineering does not work when dealing with direct costs. 
E) Value-engineering activities reduce both value-added and non-value-added costs. 
A) The goal of value-engineering is to eliminate locked-in costs. 
B) After a product's design has been value-engineered,costs are difficult to influence. 
C) When and how costs are locked in are more important than when and how costs are incurred. 
D) Value-engineering does not work when dealing with direct costs. 
E) Value-engineering activities reduce both value-added and non-value-added costs.

Question 10

Muskoka Travel offers guided tours through the lake system.Muskoka Travel provides a guide,necessary equipment,and food for a fee of $75 per person per day.Currently the company is providing an average of 600 guide-days per month.Based on available equipment and guides the maximum capacity is 950 guide-days (customers taken on the equivalent of an all day tour)per month.
Variable costs per guide-day for the year were as follows:
   
Required:
A group of foreign tourists has offered Muskoka Travel a proposal of 300 guide-days in July if they will cut the fee to $67.50 per guide-day.They have their own food and do not want to use the Muskoka Travel menus.Muskoka Travel will incur $300 in additional costs for busing the tourists back and forth to the camp site.If fixed costs would not increase,should Muskoka Travel accept the special offer?

Accepted Answer

The answer of Muskoka Travel offers guided tours through the...

Question 11

Answer the following question(s)using the information below.
Sheltar's TV currently sells small televisions for $180.It has costs of $140.A competitor is bringing a new small television to market that will sell for $150.Management believes it must lower the price to $150 to compete in the market for small televisions.Marketing believes that the new price will cause sales to increase by 10%,even with a new competitor in the market.Sheltar's sales are currently 100,000 televisions per year.
-What is the change in operating income if marketing is correct and only the sales price is changed?

Accepted Answer

A) $125,000 
B) $950,000 
C) $(3,450,000) 
D) $(2,900,000) 
E) $2,350,000) 
A) $125,000 
B) $950,000 
C) $(3,450,000) 
D) $(2,900,000) 
E) $2,350,000)

Question 12

Use the information below to answer the following question(s).
N-C Associates is in the process of evaluating its new client services for the business consulting division.Estate Planning,a new service,incurred $600,000 in development costs and employee training.The direct costs of providing this service,which is all labour,averages $100 per hour.Other costs for this service are estimated at $2,000,000 per year.The current program for estate planning is expected to last for two years.At that time a new law will be in place which will require new operating guidelines for the tax consulting.Customer service expenses average $400 per client,with each job lasting an average of 400 hours.The current staff expects to bill 40,000 hours for each of the two years the program is in effect.Billing averages $140 per hour.
-What is the N-C Associates' life-cycle operating income (loss)?

Accepted Answer

A) $(1,480,000) 
B) $(1,440,000) 
C) $(2,080,000) 
D) $11,200,000 
E) $5,600,000 
A) $(1,480,000) 
B) $(1,440,000) 
C) $(2,080,000) 
D) $11,200,000 
E) $5,600,000

Question 13

The three major influences on pricing decisions are

Accepted Answer

A) competition,costs,and customers. 
B) competition,demand,and production efficiency. 
C) continuous improvement,customer satisfaction,and a dual internal/external focus. 
D) variable costs,fixed costs,and mixed costs. 
E) economic,qualitative,and costs. 
A) competition,costs,and customers. 
B) competition,demand,and production efficiency. 
C) continuous improvement,customer satisfaction,and a dual internal/external focus. 
D) variable costs,fixed costs,and mixed costs. 
E) economic,qualitative,and costs.

Question 14

Image Products is in the process of evaluating its new cosmetic products.One new product,Nice Hair,has one production run each month with $8,000 in setup costs.Nice Hair incurred $20,000 in development costs and is expected to be produced for three years.The direct costs of producing Nice Hair are $28,000 per run of 15,000 bottles.Indirect manufacturing costs charged to each run are $44,000.Destination charges for each batch average $9,000.Nice Hair sells for $10 in Canada and $20 in all other countries.Sales are one-third domestic and two-thirds exported.Assume everything produced is sold.
Required:
What is the life-cycle budgeted operating income?

Accepted Answer

The answer of Image Products is in the process of...

Question 15

Answer the following question(s)using the information below.
Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers.Welch Manufacturing has a policy of adding a 10% markup to full costs and currently has excess capacity.The following per unit data apply for sales to regular customers:
  
-What is the full cost of the product per unit?

Accepted Answer

A) $60 
B) $180 
C) $198 
D) $66 
E) $155 
A) $60 
B) $180 
C) $198 
D) $66 
E) $155

Question 16

To minimize the chances of violating pricing laws,a company should

Accepted Answer

A) maintain records that permit easy compilation of variable costs. 
B) use a variable cost plus markup method of pricing. 
C) keep a record of the upstream costs associated with low cost products. 
D) use dumping only when a product is at the end of its life-cycle. 
E) ensure that prices do not exceed variable costs plus fixed costs. 
A) maintain records that permit easy compilation of variable costs. 
B) use a variable cost plus markup method of pricing. 
C) keep a record of the upstream costs associated with low cost products. 
D) use dumping only when a product is at the end of its life-cycle. 
E) ensure that prices do not exceed variable costs plus fixed costs.

Question 17

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 for each interior door?

Accepted Answer

A) $48 
B) $72 
C) $80 
D) $38 
E) $40 
A) $48 
B) $72 
C) $80 
D) $38 
E) $40

Question 18

In deciding whether to accept a special sales order,any fixed costs that would remain unchanged are considered irrelevant data.

Accepted Answer

A) True 
 B)False

Question 19

Backwoods Incorporated manufactures rustic furniture.The cost accounting system estimates manufacturing costs to be $80 per table,consisting of 70% variable costs and 30% fixed costs.The company has surplus capacity available.It is Backwoods' policy to add a 50% markup to full costs.
Required:
a.Backwoods Incorporated is invited to bid on an order to supply 100 rustic tables.What is the lowest price Backwoods should bid on this one-time-only special order?
b.A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style.Backwoods Incorporated is invited to submit a bid to the hotel chain.What is the lowest price per unit Backwoods should bid on this long-term order?

Accepted Answer

a.The lowest price Backwoods should bid

Question 20

Your company produces 700,000 widgets per year but has the capacity to produce 950,000 units.Company records show the following;full product costs = $85 per unit,which includes fixed manufacturing overhead of $11,and variable overhead of $4 per unit,and direct variable costs of $22,all based on the current 700,000 production run.If the company wanted to bid on a special one-time order,based on the above information only,what would be its minimum bid?

Accepted Answer

A) $59 
B) $81 
C) $63 
D) $74 
E) $85 
A) $59 
B) $81 
C) $63 
D) $74 
E) $85

Target pricing is based on

Long-run pricing is a strategic decision designed to build long-run relationships with customers in competitive markets.

Which of the following is TRUE of products with a long life cycle?

Survey evidence suggest that most companies use which type of cost when making pricing decisions?

The controller and sales manager are at odds over the pricing of a new product.What major influences should be considered in pricing the new product? Discuss each briefly.

Timothy Company has budgeted sales of $780,000 with the following budgeted costs: Compute the average markup percentage for setting prices as a percentage of: a.Total manufacturing costs b.The variable cost of the product c.The full cost of the product d.Variable manufacturing costs

Which of the following is TRUE concerning value-engineering?

The three major influences on pricing decisions are

To minimize the chances of violating pricing laws,a company should

In deciding whether to accept a special sales order,any fixed costs that would remain unchanged are considered irrelevant data.

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

Target pricing is based on

Long-run pricing is a strategic decision designed to build long-run relationships with customers in competitive markets.

Which of the following is TRUE of products with a long life cycle?

Survey evidence suggest that most companies use which type of cost when making pricing decisions?

The controller and sales manager are at odds over the pricing of a new product.What major influences should be considered in pricing the new product? Discuss each briefly.

Timothy Company has budgeted sales of $780,000 with the following budgeted costs: Compute the average markup percentage for setting prices as a percentage of: a.Total manufacturing costs b.The variable cost of the product c.The full cost of the product d.Variable manufacturing costs

Which of the following is TRUE concerning value-engineering?

The three major influences on pricing decisions are

To minimize the chances of violating pricing laws,a company should

In deciding whether to accept a special sales order,any fixed costs that would remain unchanged are considered irrelevant data.

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