Exam 5: Pricing Decisions and Profitability Analysis

. Figure 1 Ander Company produces precision equipment for major buyers. Of the six customers, one accounts for 40 percent of the sales, with the remaining five accounting for the rest of the sales. The five smaller customers purchase equipment in roughly equal quantities. Orders placed by the smaller customers are about the same size. Data concerning Ander's customer activity follow: Order-filling costs for Ander Company total £360,000, and sales-force costs are £375,000. -Refer to Figure 1 above, what amount of sales-force costs would be allocated to the five smaller customers if these costs are allocated based on sales volume?

_____ is where a higher price is charged at the beginning of a product's life cycle.

Which of the following is a FALSE statement about target costing?

Rudy Company sells a product for £450 per unit. Its market share is 25 percent. The marketing manager feels that the market share can be increased to 33 percent with a reduction in price to £390. The product is currently earning a profit of £72 per unit. The president of Rudy Company feels that the £72 profit per unit must be maintained. What is the target price per unit?

_____ on the international market is called dumping.

. Multiple Products Co. Multiple Products Co. has predicted the following costs for this year for 100,000 units: -41 Refer to Multiple Products Co. What is the markup on variable costs needed to achieve a target profit of £100,000?

Which of the following could be considered a segment?

Rudy Company sells a product for £450 per unit. Its market share is 25 percent. The marketing manager feels that the market share can be increased to 33 percent with a reduction in price to £390. The product is currently earning a profit of £72 per unit. The president of Rudy Company feels that the £72 profit per unit must be maintained. What is the original cost per unit?

Spencer Manufacturing Company sells a product for £200 per unit. Its market share is 18 percent of the units sold. The marketing manager feels that the market share can be increased to 25 percent of the units sold with a reduction in price to £170. The product is currently earning a profit of £32 per unit. The president of Spencer Manufacturing Company feels that his company needs to maintain the same profit level per unit. The market share consists of £2,000,000 (10,000 units). Required: a. How many pounds does Spencer Manufacturing Company currently sell of the product? b. What is the target price per unit? c. What is the original cost per unit? d. What is the target cost per unit?

Which of the following statements describes a legitimate disadvantage of cost-based pricing?

Which of the following statements is FALSE?

Vicki Johns operates a catering company. Vicki provides food and servers for parties. She also rents tables, chairs, dinnerware, glassware, and linens. Alan and Debbie Holms contacted Vicki about catering for their daughter's wedding. They have requested an open bar, hors d'oeuvres (enough for 300 people), a large wedding cake, and forty tables with linens, dinnerware, and glassware. Vicki put together the following bid: Required: Suppose that the Holmses blanch when they see the bid. Mr. Holmes suggests that they had hoped to spend no more than £3,750 or so on the party. How could Vicki work with the Holmses to achieve a target cost of that amount?

When cost-based pricing is employed and markup is based on manufacturing costs, the markup must be sufficiently large enough to:

. Multiple Products Co. Multiple Products Co. has predicted the following costs for this year for 100,000 units: -Refer to Multiple Products Co. What is the markup on manufacturing costs needed to break even?

The following information pertains to three different products being sold by Andy Company: Which products have an inelastic demand curve?

Provide a short critique of cost-based pricing. What are the four major drawbacks to this pricing approach?

The following information pertains to three different products being sold by Andy Company: Which products have an elastic demand curve?

Farr Company had the following information: What is the markup based on prime costs?

Etro Company sells a product used in many manufacturing processes. The sales activity involves three activity areas: The following customer information is given: Required: What is the profitability of customer B?

Answer the following: a. Discuss each of the following economic market structures (i.e., number of firms in industry, barriers to entry, uniqueness of product): 1. Perfectly competitive market 2. Monopolistic competition 3. Oligopoly 4. Monopoly b. Match the following industries with the appropriate economic market: Local cable television company Restaurants United States Post Office Cereal Wheat farmer Automotive