Exam 20: Pricing and Product Mix Decisions

When it comes to pricing decisions, the cost of the product or service is the lower limit of the price, where as the legal, political and ethical issues set the upper level of the price.

Which of the following describes, most accurately, what the area of feasible solutions on the linear programming graph represents?

Capacity has no real impact on bids submitted by firms in a competitive bidding scenario.

The management accountant's role in product mix decisions is to provide adequate information to allow linear programming to be utilised in the decision.

Total and marginal relationships in the economic profit maximising model The following questions explore the relationships between total and marginal functions in the economic profit maximising (EPM) model. i. The total revenue function rises over the range of operating activity portrayed in the text. Why does the marginal revenue function decrease? ii. The total cost function increases over the relevant range of activity. Why does the marginal cost function exhibit its complex behaviour? iii. In the EPM model, what is the profit maximising level of volume? Explain.

A firm has excess capacity, and has received an order for 50 000 units at $20 each over and above its normal production activity of 600 000 units. To meet this order, new equipment at a cost of $200 000 would have to be bought, and this equipment would have to be scrapped after the order had been filled. The firm currently sells for $50 per unit, has variable costs of $15.80, and fixed costs of $600 000. Assuming the firm had been aggressively seeking the business of the customer who requested the special order, what would be the minimum price that the firm would be prepared to charge?

Product mix decisions i. Explain management's intention when they produce different combinations of products before making the product mix decisions. ii. Describe management's approach to the product mix decisions when there are limited floor space, machine hours and labour hours available for production

Which of the following statements regarding the manufacture of new products is/are true? i. Uncertainties about the potential market for the product pose problems when pricing these products. ii. Uncertainties regarding obstacles that will be encountered in manufacturing these products pose pricing problems. iii. Uncertainties about production costs will not influence pricing decisions because these types of products are generally sold in a non-competitive market.

When a supplier dictates the minimum price at which a product or service is to be resold by a buyer to the retail or wholesale market, the supplier is said to be practicing the restricted practice of resale price maintenance.

A firm has excess capacity, and has received an order for 50 000 units at $20 each over and above its normal production activity of 600 000 units. To meet this order, new equipment at a cost of $200 000 would have to be bought, and this equipment would have to be scrapped after the order had been filled. The firm currently sells for $50 per unit, has variable costs of $15.80, and fixed costs of $600 000. What is the additional profit (loss) for the firm if it accepts the order?

Gossip Goose (GG) and Tabloid Chicks (TC) are two magazines renowned for their reporting of unverifiable entertainment news. Steven Hassaloff is the marketing director of GG, and Jasmine Trotter is the advertising manager of TC. Steven and Jasmine met at the local pub one day and decided to both sell their magazines at the same lower-than-average price ($3), in order to increase their market shares and lower the level of competitive pressure in the market. Steven and Jasmine's agreement is an example of:

Econo Auto Repair estimates the following costs for 2014. What material charge formula would be used to include a charge for the handling and storage of material on every job?

Which of the following statements regarding cost-plus pricing is/are true?