Exam 18: Pricing and Profitability Analysis

The product life cycle describes the profit history of a product according to its introduction, growth, maturity, and decline stages.

Profits are lower in the introductory phase because revenues are low and investment and learning may be high.

Which of the following product life cycle stages has revenues for the entire industry decreasing?

The sum of the change in units for each product multiplied by the difference between the budgeted contribution margin and the budgeted average unit contribution margin is called the:

The contribution margin variance is the difference between the actual contribution margin and the:

Compare and contrast the various pricing policies used by companies.

The variances used to analyze changes in profit from one period to another are called __________ variances. or

In order for an effect of changing sales mix on profit to exist, a company must produce:

Soloist Company had the following information: What is the markup on Cost of Goods sold?

A disadvantage of absorption costing is

The following information pertains to Guillotine Corporation: What is the value of the ending inventory using the absorption costing method?

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

The following information about the two motorcycle models produced by Custom Choppers, Inc. is given: Calculate the sales mix variance.

Figure 18-1 The Lancashire Corporation manufactures bottled water with an average manufacturing cost of $2 per case (a case contains 24 bottles). Bayview sold 1,000,000 cases last year to the following types of customers: The drugstore chains have special handling costs of $0.20 a case and increased administrative assistance costing $45,000 per year. The gas station chains require special marketing promotions that cost $50,000. Sales commissions of 10% are paid. The supermarket chains order electronically through EDI which costs $25,000 annually. Bayview is responsible for shipping costs, which totaled $0.50 a case and special labels costing $0.02 per bottle Local pharmacies have special handling costs of $0.10 per case and sales commissions are paid to agents costing $0.25 per case. Bad debt expense averages 10% of sales. Refer to Figure 18-1. What customer type is the most profitable ?

Scottish Company manufactures a variety of toys and games. John Chisholm, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in 2014 when 30,000 were projected. Sales for 2015 look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. What is the profit (loss) from Option Two?

Taylor Company's budgeted sales were 10,000 units at $200 per unit. Actual sales were 9,200 units at $210 per unit. Taylor's total sales variance is

Which of the following statements is TRUE?

Which of the following product life cycle stages is characterized by rapid increases in sales and production?

What are some of the pricing practices regulated by law?

Too much emphasis on short-run optimization can lead to __________ problems.