Question 1

The long-term objectives of a company need not include statements concerning pricing policy.

Accepted Answer

A) True 
 B)False

Question 2

Within the relevant range,fixed and variable costs are fairly predictable.

Accepted Answer

A) True 
 B)False

Question 3

Companies should be concerned about the effect of their prices on their public image.

Accepted Answer

A) True 
 B)False

Question 4

A transfer price should not contain any profit since the profit for a product should be determined when the product is completed.

Accepted Answer

A) True 
 B)False

Question 5

An internal issue to be considered when setting a price is

Accepted Answer

A) whether the process is labor-intensive or automated. 
B) the customer's preferences for quality versus price. 
C) current prices of competing products or services. 
D) the life of the product or service. 
A) whether the process is labor-intensive or automated. 
B) the customer's preferences for quality versus price. 
C) current prices of competing products or services. 
D) the life of the product or service.

Question 6

The state of Ohio has passed a law requiring that every automobile be inspected at least once a year for pollution control.Anson Enterprises is considering entering into this type of business.After extensive studies,Mark Anson has developed the following set of projected annual data on which to make his decision:   Anson believes that his company will inspect 100,000 automobiles per year.The company earns an average of 18.75 percent return on its assets.

-The projected cost for inspecting each automobile would be

Accepted Answer

A) $11.13. 
B) $12.03. 
C) $12.93. 
D) $10.03. 
A) $11.13. 
B) $12.03. 
C) $12.93. 
D) $10.03.

Question 7

Overhead costs allocated to divisions from corporate levels should be incorporated in the computation of the transfer price.

Accepted Answer

A) True 
 B)False

Question 8

An external issue to be considered when setting a price is

Accepted Answer

A) the variable costs of the product or service. 
B) the desired rate of return. 
C) the quality of materials and labor. 
D) the number of competing products or services. 
A) the variable costs of the product or service. 
B) the desired rate of return. 
C) the quality of materials and labor. 
D) the number of competing products or services.

Question 9

A cost-based price is a good starting point,but once a cost-based price has been determined what other factors should be considered before finalizing a selling price?

Accepted Answer

Once a cost-based price has be

Question 10

Marginal cost is the change in total cost caused by a one-unit change in output.

Accepted Answer

A) True 
 B)False

Question 11

Marginal revenue is the change in total revenue caused by a one-unit change in output.

Accepted Answer

A) True 
 B)False

Question 12

It may seem that if a company could produce an infinite number of units of product,it would realize the maximum profit.Using microeconomic theory,explain why this is not the case.

Accepted Answer

Microeconomic theory states that profits

Question 13

The pricing objective of maximizing profits

Accepted Answer

A) has not been affected by other,more socially focused concerns. 
B) is to be implemented under any and all circumstances. 
C) has not always been considered the underlying objective of any pricing policy. 
D) must be considered when determining the price needed to increase market share. 
A) has not been affected by other,more socially focused concerns. 
B) is to be implemented under any and all circumstances. 
C) has not always been considered the underlying objective of any pricing policy. 
D) must be considered when determining the price needed to increase market share.

Question 14

A company can stay in business as long as the selling price of its products is equal to all the costs incurred in bringing the product or service to market.

Accepted Answer

A) True 
 B)False

Question 15

Explain how target costing differs from traditional cost-based pricing methods.

Accepted Answer

Target costing reverses the procedure us

Question 16

Use of market transfer prices

Accepted Answer

A) is the only acceptable approach in a free enterprise economy. 
B) usually does not cause the selling division to ignore negotiating attempts by the buying division. 
C) may cause an internal shortage of materials. 
D) usually does not work against the operating objectives of the company as a whole. 
A) is the only acceptable approach in a free enterprise economy. 
B) usually does not cause the selling division to ignore negotiating attempts by the buying division. 
C) may cause an internal shortage of materials. 
D) usually does not work against the operating objectives of the company as a whole.

Question 17

A company that produces standard items for a competitive market should not have the same pricing strategies as a company that makes unique items custom-designed for its customers.

Accepted Answer

A) True 
 B)False

Question 18

Selling products on an auction market falls under which stage of the management process?

Accepted Answer

A) Planning 
B) Performing 
C) Evaluating 
D) Communicating 
A) Planning 
B) Performing 
C) Evaluating 
D) Communicating

Question 19

Transfer prices affect the revenues and costs of the divisions involved but do not affect the revenues and costs of the company as a whole.

Accepted Answer

A) True 
 B)False

Question 20

Auction-based pricing is a pricing method used primarily on the Internet where price is determined by willing buyers and sellers.

Accepted Answer

A) True 
 B)False

Exam 25: Pricing Decisions, including Target Costing and Transfer Pricing

The long-term objectives of a company need not include statements concerning pricing policy.

Within the relevant range,fixed and variable costs are fairly predictable.

Companies should be concerned about the effect of their prices on their public image.

A transfer price should not contain any profit since the profit for a product should be determined when the product is completed.

An internal issue to be considered when setting a price is

Overhead costs allocated to divisions from corporate levels should be incorporated in the computation of the transfer price.

An external issue to be considered when setting a price is

A cost-based price is a good starting point,but once a cost-based price has been determined what other factors should be considered before finalizing a selling price?

Marginal cost is the change in total cost caused by a one-unit change in output.

Marginal revenue is the change in total revenue caused by a one-unit change in output.

It may seem that if a company could produce an infinite number of units of product,it would realize the maximum profit.Using microeconomic theory,explain why this is not the case.

The pricing objective of maximizing profits

A company can stay in business as long as the selling price of its products is equal to all the costs incurred in bringing the product or service to market.

Explain how target costing differs from traditional cost-based pricing methods.

Use of market transfer prices

A company that produces standard items for a competitive market should not have the same pricing strategies as a company that makes unique items custom-designed for its customers.

Selling products on an auction market falls under which stage of the management process?

Transfer prices affect the revenues and costs of the divisions involved but do not affect the revenues and costs of the company as a whole.

Auction-based pricing is a pricing method used primarily on the Internet where price is determined by willing buyers and sellers.

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long-Term Assets

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

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