Exam 18: Pricing and Profitability Analysis

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 has the least total cost per case ?

Octagonal Company has the following information for 2016: Selling price $150 per unit Variable production costs $40 per unit produced Variable selling and admin. Expenses $16 per unit sold Fixed production costs $200,000 Fixed selling and admin. expenses $140,000 Units produced 10,000 units Units sold 8,000 units There were no beginning inventories. What is the net income for Octagonal using the variable costing method?

Consider the following portion of a segmented income statement for the year just ended. Assume that the fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses. Division X What would be the effect on the firm's operating income if Division X were discontinued?

Which of the following markets is characterized by the following: many firms in the industry, a somewhat unique product, fairly easy entry into the industry, and spending for differentiation of the product?

Which of the following is a FALSE statement about target costing?

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

What are some of the pricing practices regulated by law?

The Crested Butte Company recorded the following data for a product line:

What are the ways employee behavior changes in relation to a profit emphasis?

Goods that are price elastic have few substitutes while those that are inelastic have many substitutes.

The sales volume variance communicates the impact the difference between actual and expected units sold has on revenues.

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 sales volume variance is

Morgantown Avionics produces two types of altimeters, an Analog model and a Digital model. Budgeted and actual data for the two models are shown below: Budgeted Amounts: Actual Amounts: Calculate: a. Contribution margin variance b. Budgeted average unit contribution margin c. Contribution margin volume variance

Compare and contrast the various pricing policies used by companies.

Cost-based pricing involves the calculated product cost plus the desired profit.

New England businesses were trying to sell lumber for 50 percent above their regular prices right after 2011 hurricane Irene hit. This is an example of:

Which of the following markets is characterized by the following: many buyers and sellers, a homogeneous product, easy entry into and exit from the industry, and all firms are price takers?

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

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

The overall sales variance is the sum of the contribution margin and the sales price variance.