ACCOUNTING
Multiple Choice
Hitz Video Rental is evaluating rental prices. Historical data show that Friday and Saturday have twice the rentals of other days of the week. The following information pertains to the store's normal operations per week.
Average rentals per day on Friday and Saturday 1,150
Average rentals per day on Sunday through Thursday 500
Store hours per day 12
Total units available for rent 10,000
Variable operating costs per hour $ 40
Marketing costs per week $1,500
Customer service costs per week $ 250
The store manager wants to charge more for rentals on Friday and Saturday. What is the minimum price that should be charged during peak rental days?
a. $0.60
b. $0.83
c. $0.90
d. $1.06
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Monday, October 31, 2011
Predatory pricing is a type of price discrimination that
ACCOUNTING
Multiple Choice
Predatory pricing is a type of price discrimination that
a. allows prices to be cut to the level of variable costs.
b. is required when a company declares bankruptcy so that it can sell its remaining goods quickly.
c. is used in the food industry for perishable goods.
d. deliberately sets prices very low, sometimes even below costs, so as to minimize competition.
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Multiple Choice
Predatory pricing is a type of price discrimination that
a. allows prices to be cut to the level of variable costs.
b. is required when a company declares bankruptcy so that it can sell its remaining goods quickly.
c. is used in the food industry for perishable goods.
d. deliberately sets prices very low, sometimes even below costs, so as to minimize competition.
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All are true regarding price discrimination EXCEPT that
ACCOUNTING
Multiple Choice
All are true regarding price discrimination EXCEPT that
a. the laws apply to service providers, but not manufacturers.
b. it is permissible if price differences can be explained.
c. it is illegal only if the intent is to destroy competition.
d. it is most likely to occur when the cost base is the full cost of the product.
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Multiple Choice
All are true regarding price discrimination EXCEPT that
a. the laws apply to service providers, but not manufacturers.
b. it is permissible if price differences can be explained.
c. it is illegal only if the intent is to destroy competition.
d. it is most likely to occur when the cost base is the full cost of the product.
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The Maize Eagles are evaluating ticket prices for its basketball games
ACCOUNTING
Multiple Choice
The Maize Eagles are evaluating ticket prices for its basketball games. Studies show that Friday and Saturday night games average more than twice the fans of games on other days. The following information pertains to the stadium's normal operations per season.
Average fans per game (all games) 2,500 fans
Average fans per Friday and Saturday night games 3,500 fans
Number of home games per season 30 games
Stadium capacity 3,500 seats
Variable operating costs per operating hour $2,000
Marketing costs per season for basketball $138,750
Customer-service costs per season for basketball $25,000
The stadium is open for 5 operating hours on each day a game is played. All employees work by the hour except for the administrators. A maximum of one game is played per day and each fan has only one ticket per game.
The stadium authority wants to charge more for games on Friday and Saturday. What is the minimum price that should be charged for peak attendance nights?
a. $4.40
b. $8.60
c. $6.18
d. $171.45
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Multiple Choice
The Maize Eagles are evaluating ticket prices for its basketball games. Studies show that Friday and Saturday night games average more than twice the fans of games on other days. The following information pertains to the stadium's normal operations per season.
Average fans per game (all games) 2,500 fans
Average fans per Friday and Saturday night games 3,500 fans
Number of home games per season 30 games
Stadium capacity 3,500 seats
Variable operating costs per operating hour $2,000
Marketing costs per season for basketball $138,750
Customer-service costs per season for basketball $25,000
The stadium is open for 5 operating hours on each day a game is played. All employees work by the hour except for the administrators. A maximum of one game is played per day and each fan has only one ticket per game.
The stadium authority wants to charge more for games on Friday and Saturday. What is the minimum price that should be charged for peak attendance nights?
a. $4.40
b. $8.60
c. $6.18
d. $171.45
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The demand for this product
ACCOUNTING
Multiple Choice
LeBlanc Lighting manufactures table lamps and is considering raising the price by $10 a unit for the coming year. With a $10 price increase, demand is expected to fall by 2,000 units.
Currently Projected
Demand 20,000 units 18,000 units
Selling price $150 $160
Variable costs per unit $100 $100
The demand for this product
a. is greatly inelastic.
b. is slightly inelastic.
c. is elastic.
d. is impossible to determine.
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Multiple Choice
LeBlanc Lighting manufactures table lamps and is considering raising the price by $10 a unit for the coming year. With a $10 price increase, demand is expected to fall by 2,000 units.
Currently Projected
Demand 20,000 units 18,000 units
Selling price $150 $160
Variable costs per unit $100 $100
The demand for this product
a. is greatly inelastic.
b. is slightly inelastic.
c. is elastic.
d. is impossible to determine.
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Would you recommend the $10 price increase?
ACCOUNTING
Multiple Choice
LeBlanc Lighting manufactures table lamps and is considering raising the price by $10 a unit for the coming year. With a $10 price increase, demand is expected to fall by 2,000 units.
Currently Projected
Demand 20,000 units 18,000 units
Selling price $150 $160
Variable costs per unit $100 $100
Would you recommend the $10 price increase?
a. No, because demand decreased.
b. No, because the selling price increases.
c Yes, because contribution margin per unit increases.
d. Yes, because operating income increases.
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Multiple Choice
LeBlanc Lighting manufactures table lamps and is considering raising the price by $10 a unit for the coming year. With a $10 price increase, demand is expected to fall by 2,000 units.
Currently Projected
Demand 20,000 units 18,000 units
Selling price $150 $160
Variable costs per unit $100 $100
Would you recommend the $10 price increase?
a. No, because demand decreased.
b. No, because the selling price increases.
c Yes, because contribution margin per unit increases.
d. Yes, because operating income increases.
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Costs are a major factor
ACCOUNTING
Multiple Choice
Costs are a major factor
a. when demand is price-inelastic.
b. when demand is price-elastic.
c. when the opportunity for price discrimination exists.
d. for peak-load pricing.
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Multiple Choice
Costs are a major factor
a. when demand is price-inelastic.
b. when demand is price-elastic.
c. when the opportunity for price discrimination exists.
d. for peak-load pricing.
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When demand for a product is very elastic and prices are increased,
ACCOUNTING
Multiple Choice
When demand for a product is very elastic and prices are increased,
a. demand will remain the same, and operating profits will increase.
b. demand will remain the same, and operating profits may either increase or decrease.
c. demand will decrease, and operating profits will decrease.
d. demand will decrease, and operating profits may either increase or decrease.
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Multiple Choice
When demand for a product is very elastic and prices are increased,
a. demand will remain the same, and operating profits will increase.
b. demand will remain the same, and operating profits may either increase or decrease.
c. demand will decrease, and operating profits will decrease.
d. demand will decrease, and operating profits may either increase or decrease.
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When demand for a product is inelastic and prices are increased, usually
ACCOUNTING
Multiple Choice
When demand for a product is inelastic and prices are increased, usually
a. demand will increase, and operating profits will increase.
b. demand will remain the same, and operating profits will increase.
c. demand will decrease, and operating profits will decrease.
d. demand will remain the same, and operating profits will decrease.
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Multiple Choice
When demand for a product is inelastic and prices are increased, usually
a. demand will increase, and operating profits will increase.
b. demand will remain the same, and operating profits will increase.
c. demand will decrease, and operating profits will decrease.
d. demand will remain the same, and operating profits will decrease.
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Iowa Utility Company charges its high-usage commercial customers a lower rate per kilowatt-hour than other customers
ACCOUNTING
Multiple Choice
Iowa Utility Company charges its high-usage commercial customers a lower rate per kilowatt-hour than other customers. This is an example of
a. customer-preference pricing.
b. high-load pricing.
c. peak-load pricing.
d. price discrimination.
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Multiple Choice
Iowa Utility Company charges its high-usage commercial customers a lower rate per kilowatt-hour than other customers. This is an example of
a. customer-preference pricing.
b. high-load pricing.
c. peak-load pricing.
d. price discrimination.
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Price discrimination is the practice of
ACCOUNTING
Multiple Choice
Price discrimination is the practice of
a. setting different prices for different products.
b. charging different prices for quantity amounts.
c. using variable costing for some products and full costing for other products when setting prices.
d. charging different prices to different customers or clients for the same products or services.
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Multiple Choice
Price discrimination is the practice of
a. setting different prices for different products.
b. charging different prices for quantity amounts.
c. using variable costing for some products and full costing for other products when setting prices.
d. charging different prices to different customers or clients for the same products or services.
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What is the estimated life-cycle operating income for the first two years?
ACCOUNTING
Multiple Choice
Neises, White, Granberry and Associates are in the process of evaluating its new client services for the business consulting division.
· Estate Planning, a new service, incurred $600,000 in development costs and employee training.
· The direct costs of providing this service, which is all labor, averages $100 per hour.
· Other costs for this service are estimated at $2,000,000 per year.
· The current program for estate planning is expected to last for two years. At that time, a new law will be in place that will require new operating guidelines for the tax consulting.
· Customer service expenses average $400 per client, with each job lasting an average of 400 hours. The current staff expects to bill 40,000 hours for each of the two years the program is in effect. Billing averages $140 per hour.
What is the estimated life-cycle operating income for the first two years?
a. $(1,480,000)
b. $(1,400,000)
c. $3,200,000
d. $11,200,000
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Multiple Choice
Neises, White, Granberry and Associates are in the process of evaluating its new client services for the business consulting division.
· Estate Planning, a new service, incurred $600,000 in development costs and employee training.
· The direct costs of providing this service, which is all labor, averages $100 per hour.
· Other costs for this service are estimated at $2,000,000 per year.
· The current program for estate planning is expected to last for two years. At that time, a new law will be in place that will require new operating guidelines for the tax consulting.
· Customer service expenses average $400 per client, with each job lasting an average of 400 hours. The current staff expects to bill 40,000 hours for each of the two years the program is in effect. Billing averages $140 per hour.
What is the estimated life-cycle operating income for the first two years?
a. $(1,480,000)
b. $(1,400,000)
c. $3,200,000
d. $11,200,000
Click here for the SOLUTION
What is estimated life-cycle operating income for the first year?
ACCOUNTING
Multiple Choice
Neises, White, Granberry and Associates are in the process of evaluating its new client services for the business consulting division.
· Estate Planning, a new service, incurred $600,000 in development costs and employee training.
· The direct costs of providing this service, which is all labor, averages $100 per hour.
· Other costs for this service are estimated at $2,000,000 per year.
· The current program for estate planning is expected to last for two years. At that time, a new law will be in place that will require new operating guidelines for the tax consulting.
· Customer service expenses average $400 per client, with each job lasting an average of 400 hours. The current staff expects to bill 40,000 hours for each of the two years the program is in effect. Billing averages $140 per hour.
What is estimated life-cycle operating income for the first year?
a. $(1,040,000)
b. $(1,400,000)
c. $5,600,000
d. $6,640,000
Click here for the SOLUTION
Multiple Choice
Neises, White, Granberry and Associates are in the process of evaluating its new client services for the business consulting division.
· Estate Planning, a new service, incurred $600,000 in development costs and employee training.
· The direct costs of providing this service, which is all labor, averages $100 per hour.
· Other costs for this service are estimated at $2,000,000 per year.
· The current program for estate planning is expected to last for two years. At that time, a new law will be in place that will require new operating guidelines for the tax consulting.
· Customer service expenses average $400 per client, with each job lasting an average of 400 hours. The current staff expects to bill 40,000 hours for each of the two years the program is in effect. Billing averages $140 per hour.
What is estimated life-cycle operating income for the first year?
a. $(1,040,000)
b. $(1,400,000)
c. $5,600,000
d. $6,640,000
Click here for the SOLUTION
1. What are estimated life-cycle revenues?
ACCOUNTING
Multiple Choice
Neises, White, Granberry and Associates are in the process of evaluating its new client services for the business consulting division.
· Estate Planning, a new service, incurred $600,000 in development costs and employee training.
· The direct costs of providing this service, which is all labor, averages $100 per hour.
· Other costs for this service are estimated at $2,000,000 per year.
· The current program for estate planning is expected to last for two years. At that time, a new law will be in place that will require new operating guidelines for the tax consulting.
· Customer service expenses average $400 per client, with each job lasting an average of 400 hours. The current staff expects to bill 40,000 hours for each of the two years the program is in effect. Billing averages $140 per hour.
What are estimated life-cycle revenues?
a. $6,400,000
b. $8,000,000
c. $11,200,000
d. $22,400,000
Click here for the SOLUTION
Multiple Choice
Neises, White, Granberry and Associates are in the process of evaluating its new client services for the business consulting division.
· Estate Planning, a new service, incurred $600,000 in development costs and employee training.
· The direct costs of providing this service, which is all labor, averages $100 per hour.
· Other costs for this service are estimated at $2,000,000 per year.
· The current program for estate planning is expected to last for two years. At that time, a new law will be in place that will require new operating guidelines for the tax consulting.
· Customer service expenses average $400 per client, with each job lasting an average of 400 hours. The current staff expects to bill 40,000 hours for each of the two years the program is in effect. Billing averages $140 per hour.
What are estimated life-cycle revenues?
a. $6,400,000
b. $8,000,000
c. $11,200,000
d. $22,400,000
Click here for the SOLUTION
What is the estimated life-cycle operating income for the first three years?
ACCOUNTING
Multiple Choice
Bicker, Inc., is in the process of evaluating a new product using the following information.
· A new transformer has two production runs each year, each with $10,000 in setup costs.
· The new transformer incurred $30,000 in development costs and is expected to be produced over the next three years.
· Direct costs of producing the transformers are $40,000 per run of 5,000 transformers each.
· Indirect manufacturing costs charged to each run are $45,000.
· Destination charges for each transformer average $1.00.
· Customer service expenses average $0.20 per transformer.
· The transformers are selling for $25 the first year and will increase by $3 each year thereafter.
· Sales units equal production units each year.
What is the estimated life-cycle operating income for the first three years?
a. $174,000
b. $204,000
c. $636,000
d. $840,000
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Multiple Choice
Bicker, Inc., is in the process of evaluating a new product using the following information.
· A new transformer has two production runs each year, each with $10,000 in setup costs.
· The new transformer incurred $30,000 in development costs and is expected to be produced over the next three years.
· Direct costs of producing the transformers are $40,000 per run of 5,000 transformers each.
· Indirect manufacturing costs charged to each run are $45,000.
· Destination charges for each transformer average $1.00.
· Customer service expenses average $0.20 per transformer.
· The transformers are selling for $25 the first year and will increase by $3 each year thereafter.
· Sales units equal production units each year.
What is the estimated life-cycle operating income for the first three years?
a. $174,000
b. $204,000
c. $636,000
d. $840,000
Click here for the SOLUTION
What is the estimated life-cycle operating income for the first year?
ACCOUNTING
Multiple Choice
Bicker, Inc., is in the process of evaluating a new product using the following information.
· A new transformer has two production runs each year, each with $10,000 in setup costs.
· The new transformer incurred $30,000 in development costs and is expected to be produced over the next three years.
· Direct costs of producing the transformers are $40,000 per run of 5,000 transformers each.
· Indirect manufacturing costs charged to each run are $45,000.
· Destination charges for each transformer average $1.00.
· Customer service expenses average $0.20 per transformer.
· The transformers are selling for $25 the first year and will increase by $3 each year thereafter.
· Sales units equal production units each year.
What is the estimated life-cycle operating income for the first year?
a. $18,000
b. $20,000
c. $48,000
d. $119,000
Click here for the SOLUTION
Multiple Choice
Bicker, Inc., is in the process of evaluating a new product using the following information.
· A new transformer has two production runs each year, each with $10,000 in setup costs.
· The new transformer incurred $30,000 in development costs and is expected to be produced over the next three years.
· Direct costs of producing the transformers are $40,000 per run of 5,000 transformers each.
· Indirect manufacturing costs charged to each run are $45,000.
· Destination charges for each transformer average $1.00.
· Customer service expenses average $0.20 per transformer.
· The transformers are selling for $25 the first year and will increase by $3 each year thereafter.
· Sales units equal production units each year.
What is the estimated life-cycle operating income for the first year?
a. $18,000
b. $20,000
c. $48,000
d. $119,000
Click here for the SOLUTION
What are estimated life-cycle revenues?
ACCOUNTING
Multiple Choice
Bicker, Inc., is in the process of evaluating a new product using the following information.
· A new transformer has two production runs each year, each with $10,000 in setup costs.
· The new transformer incurred $30,000 in development costs and is expected to be produced over the next three years.
· Direct costs of producing the transformers are $40,000 per run of 5,000 transformers each.
· Indirect manufacturing costs charged to each run are $45,000.
· Destination charges for each transformer average $1.00.
· Customer service expenses average $0.20 per transformer.
· The transformers are selling for $25 the first year and will increase by $3 each year thereafter.
· Sales units equal production units each year.
What are estimated life-cycle revenues?
a. $250,000
b. $280,000
c. $310,000
d. $840,000
Click here for the SOLUTION
Multiple Choice
Bicker, Inc., is in the process of evaluating a new product using the following information.
· A new transformer has two production runs each year, each with $10,000 in setup costs.
· The new transformer incurred $30,000 in development costs and is expected to be produced over the next three years.
· Direct costs of producing the transformers are $40,000 per run of 5,000 transformers each.
· Indirect manufacturing costs charged to each run are $45,000.
· Destination charges for each transformer average $1.00.
· Customer service expenses average $0.20 per transformer.
· The transformers are selling for $25 the first year and will increase by $3 each year thereafter.
· Sales units equal production units each year.
What are estimated life-cycle revenues?
a. $250,000
b. $280,000
c. $310,000
d. $840,000
Click here for the SOLUTION
Customer life-cycle costs
ACCOUNTING
Multiple Choice
Customer life-cycle costs
a. are the costs incurred by the selling company to satisfy the customer.
b. are the costs to the customer for buying and using a product.
c. are the same as the selling life-cycle prices.
d. are the replacement costs of using a product or service.
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Multiple Choice
Customer life-cycle costs
a. are the costs incurred by the selling company to satisfy the customer.
b. are the costs to the customer for buying and using a product.
c. are the same as the selling life-cycle prices.
d. are the replacement costs of using a product or service.
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Life-cycle budgeting
ACCOUNTING
Multiple Choice
Life-cycle budgeting
a. has little in common with target pricing.
b. is most useful to companies that manufacture small items such as household plastics.
c. helps companies estimate revenues over a multiyear horizon.
d. gives companies more insight into total costs when manufacturing costs consume the majority of the resources.
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Multiple Choice
Life-cycle budgeting
a. has little in common with target pricing.
b. is most useful to companies that manufacture small items such as household plastics.
c. helps companies estimate revenues over a multiyear horizon.
d. gives companies more insight into total costs when manufacturing costs consume the majority of the resources.
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Life-cycle budgeting and life-cycle costing help highlight
ACCOUNTING
Multiple Choice
Life-cycle budgeting and life-cycle costing help highlight
a. an increase in customer-service costs due to using inferior materials.
b. high production costs caused by a complex design.
c. large ordering costs due to the great number of component parts used.
d. an increase in annual operating income resulting from the new product.
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Multiple Choice
Life-cycle budgeting and life-cycle costing help highlight
a. an increase in customer-service costs due to using inferior materials.
b. high production costs caused by a complex design.
c. large ordering costs due to the great number of component parts used.
d. an increase in annual operating income resulting from the new product.
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