Question 1

In the economic profit-maximising pricing model,how do the total revenue and total cost curves generally behave?
Total revenue
Total cost

Accepted Answer

A)  Upward sloping at increasing rate
Upward sloping at decreasing rate 
B)  Upward sloping at increasing rate
Upward sloping at constant rate 
C)  Upward sloping at decreasing rate
Upward sloping,rate decreases,then increases 
D)  Downward sloping at constant rate
Downward sloping,then upward sloping 
A)  Upward sloping at increasing rate
Upward sloping at decreasing rate 
B)  Upward sloping at increasing rate
Upward sloping at constant rate 
C)  Upward sloping at decreasing rate
Upward sloping,rate decreases,then increases 
D)  Downward sloping at constant rate
Downward sloping,then upward sloping

Question 2

Which of the following statements about price-fixing contracts is/are true?
i.Price-fixing contracts are prohibited where they have the effect of substantially lessening competition
ii.Price-fixing contracts are a means of quoting different prices for different customers.
iii.Price-fixing contracts result in controlling the prices of goods or services.

Accepted Answer

A)  i 
B)  ii and iii 
C)  i and iii 
D)  iii 
A)  i 
B)  ii and iii 
C)  i and iii 
D)  iii

Question 3

Sample Company reported the following costs during 2008 for the manufacture and sale of 2000 units:
The average amount of capital invested in the product line during the year was $500 000 and the targeted return on investment was 20 per cent.If Sample's price per unit was $245 and the mark-up percentage was 53 per cent,what pricing formula was used by the company?

Accepted Answer

A)  Total variable cost-plus 
B)  Variable manufacturing cost-plus 
C)  Absorption cost-plus 
D)  Time and materials cost-plus 
A)  Total variable cost-plus 
B)  Variable manufacturing cost-plus 
C)  Absorption cost-plus 
D)  Time and materials cost-plus

Question 4

What term describes a pricing strategy in which the initial price is set relatively low for a new product in order to gain a large market share?

Accepted Answer

A)  Penetration pricing 
B)  Target pricing 
C)  Designed pricing 
D)  Market share pricing 
A)  Penetration pricing 
B)  Target pricing 
C)  Designed pricing 
D)  Market share pricing

Question 5

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?

Accepted Answer

A)  Loss of $10 000 
B)  Profit of $40 000 
C)  Loss of $40 000 
D)  Profit of $10 000 
A)  Loss of $10 000 
B)  Profit of $40 000 
C)  Loss of $40 000 
D)  Profit of $10 000

Question 6

The marginal revenue curve:

Accepted Answer

A)  shows the changes in total revenue that accompany a change in quantity sold. 
B)  shows the relationship between sales price and units sold. 
C)  shows the relationship between sales revenue and quantity. 
D)  shows the average price at which any particular quantity can be sold. 
A)  shows the changes in total revenue that accompany a change in quantity sold. 
B)  shows the relationship between sales price and units sold. 
C)  shows the relationship between sales revenue and quantity. 
D)  shows the average price at which any particular quantity can be sold.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements about competitive bidding is/are true?

Accepted Answer

A)  In a competitive bidding situation,the criterion to select the contractor is always based solely on the design specifications of the job. 
B)  Competitive bidding occurs when two or more companies submit a sealed bid for a product,service or project to a potential buyer. 
C)  From the perspective of the bidder,quantitative factors are more important than qualitative factors in competitive bidding situations. 
D)  In a competitive bidding situation,the criterion to select the contractor is always based solely on the design specifications of the job AND competitive bidding occurs when two or more companies submit a sealed bid for a product,service or project to a potential buyer. 
A)  In a competitive bidding situation,the criterion to select the contractor is always based solely on the design specifications of the job. 
B)  Competitive bidding occurs when two or more companies submit a sealed bid for a product,service or project to a potential buyer. 
C)  From the perspective of the bidder,quantitative factors are more important than qualitative factors in competitive bidding situations. 
D)  In a competitive bidding situation,the criterion to select the contractor is always based solely on the design specifications of the job AND competitive bidding occurs when two or more companies submit a sealed bid for a product,service or project to a potential buyer.

Question 9

Town and Country Auto Repair uses time and material pricing.The Body Shop has the following cost data.Determine the amount needed to be added to each dollar of material cost to obtain the material charge.

Accepted Answer

A)  $0.48 
B)  $0.08 
C)  $0.06 
D)  $0.10 
A)  $0.48 
B)  $0.08 
C)  $0.06 
D)  $0.10

Question 10

Consider the following statements regarding cost-plus pricing formulas.i.Full cost pricing formulas have the advantage of keeping the manager's attention focused on covering total costs
ii.With cost-plus pricing formulas,management must consider market conditions and likely actions of competitors.
iii.Variable cost-plus formulas have the advantage of not obscuring important information about cost behaviour.Which of the above statements is/are true?

Accepted Answer

A)  i 
B)  ii and iii 
C)  i and iii 
D)  All of the given answers 
A)  i 
B)  ii and iii 
C)  i and iii 
D)  All of the given answers

Question 11

In linear programming,the objective function is typically based on:

Accepted Answer

A)  the selling price of the products 
B)  the variable cost of the products 
C)  the full cost of the products 
D)  the contribution margin of the products 
A)  the selling price of the products 
B)  the variable cost of the products 
C)  the full cost of the products 
D)  the contribution margin of the products

Question 12

Linear programming is a tool used to determine an optimal solution given a number of constraints,by identifying linear relationships between decision variables.

Accepted Answer

A) True 
 B)False

Question 13

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.

Accepted Answer

A)  i 
B)  iii 
C)  i and ii 
D)  All of the given answers 
A)  i 
B)  iii 
C)  i and ii 
D)  All of the given answers

Question 14

Silco Pty Ltd manufactures various lines of computer equipment.They are planning to introduce a line of laptop computers in January 2008.Current plans call for the production and sale of 1000 computers with estimated production costs as follows.The average amount of capital invested in the laptop computer line is $900 000 and Silco's target return on investment for the line is 18 per cent.If Silco uses cost-plus pricing based on absorption cost,determine the mark-up percentage the company must use.

Accepted Answer

A)  21.6% 
B)  15.7% 
C)  29.5% 
D)  None of the given answers 
A)  21.6% 
B)  15.7% 
C)  29.5% 
D)  None of the given answers

Question 15

Silco Pty Ltd manufactures various lines of computer equipment.They are planning to introduce a line of laptop computers in January 2008.Current plans call for the production and sale of 1000 computers with estimated production costs as follows.The average amount of capital invested in the laptop computer line is $900 000 and Silco's target return on investment for the line is 18 per cent.What price must Silco charge if the company uses cost-plus pricing based on total variable cost?

Accepted Answer

A)  $1930 
B)  $712 
C)  $1192 
D)  $1030 
A)  $1930 
B)  $712 
C)  $1192 
D)  $1030

Question 16

The Mixed-Up Floor Co.Ltd makes two products,carpet polish and floor deodoriser.Operating information from the previous year is as follows.Fixed costs of $20 000 per year are presently allocated evenly between both products.If the product mix were to change,total fixed costs would remain the same.Assuming everything produced for either product can be sold,how many units of each product should be produced and sold if machine hours are limited to 10 000?
 
Carpet polish
Floor deodoriser

Accepted Answer

A)  10 000 units
0 units 
B)  5 000 units
10 000 units 
C)  8 000 units
4000 units 
D)  0 units
20 000 units 
A)  10 000 units
0 units 
B)  5 000 units
10 000 units 
C)  8 000 units
4000 units 
D)  0 units
20 000 units

Question 17

Which of the following statements about prices is false?

Accepted Answer

A)  Prices must cover all costs and a normal profit margin. 
B)  A variable cost-plus pricing formula requires a higher mark-up percentage than a total cost-plus pricing formula. 
C)  Different definitions of cost base,each combined with a different mark-up percentage,will result in the same price for a product or service. 
D)  If prices are set close to variable manufacturing costs,the firm will generally earn a higher profit margin. 
A)  Prices must cover all costs and a normal profit margin. 
B)  A variable cost-plus pricing formula requires a higher mark-up percentage than a total cost-plus pricing formula. 
C)  Different definitions of cost base,each combined with a different mark-up percentage,will result in the same price for a product or service. 
D)  If prices are set close to variable manufacturing costs,the firm will generally earn a higher profit margin.

Question 18

When decisions are being made about unprofitable products,one of the options available to managers is to retain the loss-making product particularly if it forms a part of a range of products that the firm wishes to sell.

Accepted Answer

A) True 
 B)False

Question 19

A firm employs average assets of $600 000 and calculates its mark-up on full cost based on a desired return on investment of 20 per cent.Expected production is 10 000 units,and the full cost per unit is $80.What is the mark-up percentage?

Accepted Answer

A)  20% 
B)  120% 
C)  15% 
D)  25% 
A)  20% 
B)  120% 
C)  15% 
D)  25%

Question 20

Price elasticity is the term used to describe the impact of price changes on sales volume.

Accepted Answer

A) True 
 B)False

In the economic profit-maximising pricing model,how do the total revenue and total cost curves generally behave? Total revenue Total cost

What term describes a pricing strategy in which the initial price is set relatively low for a new product in order to gain a large market share?

The marginal revenue curve:

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

Which of the following statements about competitive bidding is/are true?

Town and Country Auto Repair uses time and material pricing.The Body Shop has the following cost data.Determine the amount needed to be added to each dollar of material cost to obtain the material charge.

In linear programming,the objective function is typically based on:

Linear programming is a tool used to determine an optimal solution given a number of constraints,by identifying linear relationships between decision variables.

Which of the following statements about prices is false?

When decisions are being made about unprofitable products,one of the options available to managers is to retain the loss-making product particularly if it forms a part of a range of products that the firm wishes to sell.

A firm employs average assets of $600 000 and calculates its mark-up on full cost based on a desired return on investment of 20 per cent.Expected production is 10 000 units,and the full cost per unit is $80.What is the mark-up percentage?

Price elasticity is the term used to describe the impact of price changes on sales volume.

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Information for Capital Expenditure Decisions

Filters

Exam 20: Pricing and Product Mix Decisions

In the economic profit-maximising pricing model,how do the total revenue and total cost curves generally behave? Total revenue Total cost

What term describes a pricing strategy in which the initial price is set relatively low for a new product in order to gain a large market share?

The marginal revenue curve:

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

Which of the following statements about competitive bidding is/are true?

Town and Country Auto Repair uses time and material pricing.The Body Shop has the following cost data.Determine the amount needed to be added to each dollar of material cost to obtain the material charge.

In linear programming,the objective function is typically based on:

Linear programming is a tool used to determine an optimal solution given a number of constraints,by identifying linear relationships between decision variables.

Which of the following statements about prices is false?

When decisions are being made about unprofitable products,one of the options available to managers is to retain the loss-making product particularly if it forms a part of a range of products that the firm wishes to sell.

A firm employs average assets of $600 000 and calculates its mark-up on full cost based on a desired return on investment of 20 per cent.Expected production is 10 000 units,and the full cost per unit is $80.What is the mark-up percentage?

Price elasticity is the term used to describe the impact of price changes on sales volume.

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Information for Capital Expenditure Decisions

Filters