Exam 20: Pricing and Product Mix Decisions

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 is the mark-up percentage if the company uses cost-plus pricing based on total variable cost?

Which of the following statements regarding price is/are true? i.Prices are determined by the market,subject to the constraint that costs must be covered in the long run ii.Prices are based on costs,subject to the constraint that customers and competitors will exert an influence ii.A balance of market forces and cost is important when making pricing decisions.

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.

The curve that shows the relationship between sales price and quantity sold is called the:

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.

Karl's Kitchens is experimenting with different vinegars for sale on the domestic market.The contribution margins per carton for three types V1,V2 and V3 are $120,$100 and $150 respectively.The firm is constrained in terms of labour hours,and the labour hours required per carton of each type of vinegar is 2 hours,1.5 hours and 3 hours respectively.Assume the firm has 2240 available labour hours per month,and the monthly demand is 1200 cartons of V1,800 cartons of V2 and 300 cartons of V3.What is the product mix that will maximise profit?

Tots N Style Pty Ltd has the following data concerning a decorator playpen it manufactures: If the company uses cost-plus pricing based on absorption costs,determine the mark-up percentage used by the company to obtain a price of $120.

Managers base prices on product costs due to many reasons.Which of the following is not one of the reasons?

Avocado Ltd produces small electronic components for kitchen appliances.Two of its products are Component Y and Component Z.The selling price of Component Y is $15,and the selling price of Component Z is $20.The variable cost per unit for Component Y is $8 and the variable cost per unit of Component Z is $11.The machine hour requirement and demand for the two products are: Both Component Y and Component X have to undergo the machining process first,followed by a manual polishing labour process.Avocado Ltd's capacity is 6500 machine hours and 6500 labour hours.The top priority of Avocado Ltd in terms of managing constraints is:

Tots N Style Pty Ltd has the following data concerning a decorator playpen it manufactures: If the company uses cost-plus pricing based on full cost,determine the mark-up percentage used by the company to obtain a price of $105.

Which of the following formulas represents the mark-up percentage on full cost?

Econo Auto Repair estimates the following costs for 2008.What material charge formula would be used to include a charge for the handling and storage of material on every job?

What is price discrimination?

Which of the following statements is false regarding price elasticity?

Linear programming is useful:

The Houston Company manufactures office equipment.They are ready to introduce a new line of desktop copiers.The following data concerns the copiers: If the company uses cost-plus pricing based on full cost,what price must the company charge when the mark-up percentage is 40 per cent?

If a firm has excess capacity,which of the following is a sensible bidding strategy?

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

C Limited manufactures specialist medical equipment.Recruitment and training of manufacturing staff is difficult and C's operations management estimates that only 160 000 hours of labour at a rate of $50 per hour will be available in the next financial year.The following details relate to C's planned production of three products X,Y and Z for the next 12 months.To maximise profits the products C should manufacture are:

An approach to pricing in which two charges are determined,one charge for labour used on the job and another charge for the materials used on the job,is called: