ACCOUNTING
Multiple Choice
Life-cycle budgeting is particularly important when
a. the development period for R&D is short and inexpensive.
b. there are significant nonproduction costs.
c. most costs are locked in during production.
d. a low percentage of costs are incurred before any revenues are received.
Click here for the SOLUTION
Sunday, September 18, 2011
An understanding of life-cycle costs can lead to
ACCOUNTING
Multiple Choice
An understanding of life-cycle costs can lead to
a. additional costs during the manufacturing cycle.
b. less need for evaluation of the competition.
c. cost effective product designs that are easier to service.
d. mutually beneficial relationships between buyers and sellers.
Click here for the SOLUTION
Multiple Choice
An understanding of life-cycle costs can lead to
a. additional costs during the manufacturing cycle.
b. less need for evaluation of the competition.
c. cost effective product designs that are easier to service.
d. mutually beneficial relationships between buyers and sellers.
Click here for the SOLUTION
Life-cycle costing is the name given to
ACCOUNTING
Multiple Choice
Life-cycle costing is the name given to
a. a method of cost planning to reduce manufacturing costs to targeted levels.
b. the process of examining each component of a product to determine whether its cost can be reduced.
c. the process of managing all costs along the value chain.
d. a system that focuses on reducing costs during the manufacturing cycle.
Click here for the SOLUTION
Multiple Choice
Life-cycle costing is the name given to
a. a method of cost planning to reduce manufacturing costs to targeted levels.
b. the process of examining each component of a product to determine whether its cost can be reduced.
c. the process of managing all costs along the value chain.
d. a system that focuses on reducing costs during the manufacturing cycle.
Click here for the SOLUTION
The markup percentage for setting prices as a percentage of the full cost of the product is
ACCOUNTING
Multiple Choice
Meyer Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
Direct materials $ 562,500
Direct labor 390,000
Manufacturing overhead
Variable 420,000
Fixed 322,500
Selling and administrative
Variable 180,000
Fixed 240,000
Total costs $2,115,000
Meyer has an annual target operating income of $450,000.
The markup percentage for setting prices as a percentage of the full cost of the product is
a. 328%.
b. 36%.
c. 228%.
d. 21%.
Click here for the SOLUTION
Multiple Choice
Meyer Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
Direct materials $ 562,500
Direct labor 390,000
Manufacturing overhead
Variable 420,000
Fixed 322,500
Selling and administrative
Variable 180,000
Fixed 240,000
Total costs $2,115,000
Meyer has an annual target operating income of $450,000.
The markup percentage for setting prices as a percentage of the full cost of the product is
a. 328%.
b. 36%.
c. 228%.
d. 21%.
Click here for the SOLUTION
The markup percentage for setting prices as a percentage of the variable cost of the product is
ACCOUNTING
Multiple Choice
Meyer Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
Direct materials $ 562,500
Direct labor 390,000
Manufacturing overhead
Variable 420,000
Fixed 322,500
Selling and administrative
Variable 180,000
Fixed 240,000
Total costs $2,115,000
Meyer has an annual target operating income of $450,000.
The markup percentage for setting prices as a percentage of the variable cost of the product is
a. 328%.
b. 36%.
c. 228%.
d. 65%.
Click here for the SOLUTION
Multiple Choice
Meyer Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
Direct materials $ 562,500
Direct labor 390,000
Manufacturing overhead
Variable 420,000
Fixed 322,500
Selling and administrative
Variable 180,000
Fixed 240,000
Total costs $2,115,000
Meyer has an annual target operating income of $450,000.
The markup percentage for setting prices as a percentage of the variable cost of the product is
a. 328%.
b. 36%.
c. 228%.
d. 65%.
Click here for the SOLUTION
The markup percentage for setting prices as a percentage of variable manufacturing costs is
ACCOUNTING
Multiple Choice
Meyer Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
Direct materials $ 562,500
Direct labor 390,000
Manufacturing overhead
Variable 420,000
Fixed 322,500
Selling and administrative
Variable 180,000
Fixed 240,000
Total costs $2,115,000
Meyer has an annual target operating income of $450,000.
The markup percentage for setting prices as a percentage of variable manufacturing costs is
a. 54%.
b. 87%.
c. 169%.
d. 122%.
Click here for the SOLUTION
Multiple Choice
Meyer Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
Direct materials $ 562,500
Direct labor 390,000
Manufacturing overhead
Variable 420,000
Fixed 322,500
Selling and administrative
Variable 180,000
Fixed 240,000
Total costs $2,115,000
Meyer has an annual target operating income of $450,000.
The markup percentage for setting prices as a percentage of variable manufacturing costs is
a. 54%.
b. 87%.
c. 169%.
d. 122%.
Click here for the SOLUTION
The markup percentage for setting prices as a percentage of total manufacturing costs is
ACCOUNTING
Multiple Choice
Meyer Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
Direct materials $ 562,500
Direct labor 390,000
Manufacturing overhead
Variable 420,000
Fixed 322,500
Selling and administrative
Variable 180,000
Fixed 240,000
Total costs $2,115,000
Meyer has an annual target operating income of $450,000.
The markup percentage for setting prices as a percentage of total manufacturing costs is
a. 51%.
b. 125%.
c. 185%.
d. 245%.
Click here for the SOLUTION
Multiple Choice
Meyer Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
Direct materials $ 562,500
Direct labor 390,000
Manufacturing overhead
Variable 420,000
Fixed 322,500
Selling and administrative
Variable 180,000
Fixed 240,000
Total costs $2,115,000
Meyer has an annual target operating income of $450,000.
The markup percentage for setting prices as a percentage of total manufacturing costs is
a. 51%.
b. 125%.
c. 185%.
d. 245%.
Click here for the SOLUTION
What is the cost base of each juicer machine for Grant Company?
ACCOUNTING
Multiple Choice
Grant Company has invested $1,000,000 in a plant to make commercial juicer machines. The target operating income desired from the plant is $180,000 annually. The company plans annual sales of 7,000 juicer machines at a selling price of $200 each.
What is the cost base of each juicer machine for Grant Company?
a. $174
b. $162
c. $169
d. $152
Click here for the SOLUTION
Multiple Choice
Grant Company has invested $1,000,000 in a plant to make commercial juicer machines. The target operating income desired from the plant is $180,000 annually. The company plans annual sales of 7,000 juicer machines at a selling price of $200 each.
What is the cost base of each juicer machine for Grant Company?
a. $174
b. $162
c. $169
d. $152
Click here for the SOLUTION
What is the markup percentage as a percentage of cost for Grant Company?
ACCOUNTING
Multiple Choice
Grant Company has invested $1,000,000 in a plant to make commercial juicer machines. The target operating income desired from the plant is $180,000 annually. The company plans annual sales of 7,000 juicer machines at a selling price of $200 each.
What is the markup percentage as a percentage of cost for Grant Company?
a. 22.0%
b. 18.0%
c. 14.8%
d. 12.9%
Click here for the SOLUTION
Multiple Choice
Grant Company has invested $1,000,000 in a plant to make commercial juicer machines. The target operating income desired from the plant is $180,000 annually. The company plans annual sales of 7,000 juicer machines at a selling price of $200 each.
What is the markup percentage as a percentage of cost for Grant Company?
a. 22.0%
b. 18.0%
c. 14.8%
d. 12.9%
Click here for the SOLUTION
What is the target rate of return on investment for Grant Company?
ACCOUNTING
Multiple Choice
Grant Company has invested $1,000,000 in a plant to make commercial juicer machines. The target operating income desired from the plant is $180,000 annually. The company plans annual sales of 7,000 juicer machines at a selling price of $200 each.
What is the target rate of return on investment for Grant Company?
a. 22.0%
b. 18.0%
c. 14.8%
d. 12.9%
Click here for the SOLUTION
Multiple Choice
Grant Company has invested $1,000,000 in a plant to make commercial juicer machines. The target operating income desired from the plant is $180,000 annually. The company plans annual sales of 7,000 juicer machines at a selling price of $200 each.
What is the target rate of return on investment for Grant Company?
a. 22.0%
b. 18.0%
c. 14.8%
d. 12.9%
Click here for the SOLUTION
What is the cost base of each vending machine for Timothy Company?
ACCOUNTING
Multiple Choice
Timothy Company has invested $2,000,000 in a plant to make vending machines. The target operating income desired from the plant is $300,000 annually. The company plans annual sales of 1,500 vending machines at a selling price of $2,000 each.
What is the cost base of each vending machine for Timothy Company?
a. $1,739
b. $1,802
c. $1,700
d. $1,780
Click here for the SOLUTION
Multiple Choice
Timothy Company has invested $2,000,000 in a plant to make vending machines. The target operating income desired from the plant is $300,000 annually. The company plans annual sales of 1,500 vending machines at a selling price of $2,000 each.
What is the cost base of each vending machine for Timothy Company?
a. $1,739
b. $1,802
c. $1,700
d. $1,780
Click here for the SOLUTION
What is the markup percentage as a percentage of cost for Timothy Company?
ACCOUNTING
Multiple Choice
Timothy Company has invested $2,000,000 in a plant to make vending machines. The target operating income desired from the plant is $300,000 annually. The company plans annual sales of 1,500 vending machines at a selling price of $2,000 each.
What is the markup percentage as a percentage of cost for Timothy Company?
a. 15.0%
b. 17.6%
c. 10.0%
d. 11.1%
Click here for the SOLUTION
Multiple Choice
Timothy Company has invested $2,000,000 in a plant to make vending machines. The target operating income desired from the plant is $300,000 annually. The company plans annual sales of 1,500 vending machines at a selling price of $2,000 each.
What is the markup percentage as a percentage of cost for Timothy Company?
a. 15.0%
b. 17.6%
c. 10.0%
d. 11.1%
Click here for the SOLUTION
What is the target rate of return on investment for Timothy Company?
ACCOUNTING
Multiple Choice
Timothy Company has invested $2,000,000 in a plant to make vending machines. The target operating income desired from the plant is $300,000 annually. The company plans annual sales of 1,500 vending machines at a selling price of $2,000 each.
What is the target rate of return on investment for Timothy Company?
a. 15.0%
b. 17.6%
c. 10.0%
d. 11.1%
Click here for the SOLUTION
Multiple Choice
Timothy Company has invested $2,000,000 in a plant to make vending machines. The target operating income desired from the plant is $300,000 annually. The company plans annual sales of 1,500 vending machines at a selling price of $2,000 each.
What is the target rate of return on investment for Timothy Company?
a. 15.0%
b. 17.6%
c. 10.0%
d. 11.1%
Click here for the SOLUTION
Advantages of using the full cost of the product as the cost base include all EXCEPT
ACCOUNTING
Multiple Choice
Advantages of using the full cost of the product as the cost base include all EXCEPT
a. that managers are informed regarding the minimum long-run cost they need to recover to stay in business.
b. that it limits the ability of a salesperson to cut prices.
c. that fixed cost allocations can be arbitrary.
d. that it does not require a detailed analysis of cost behavior for computations.
Click here for the SOLUTION
Multiple Choice
Advantages of using the full cost of the product as the cost base include all EXCEPT
a. that managers are informed regarding the minimum long-run cost they need to recover to stay in business.
b. that it limits the ability of a salesperson to cut prices.
c. that fixed cost allocations can be arbitrary.
d. that it does not require a detailed analysis of cost behavior for computations.
Click here for the SOLUTION
Which of the following statements is FALSE regarding cost-plus pricing?
ACCOUNTING
Multiple Choice
Which of the following statements is FALSE regarding cost-plus pricing?
a. A company selects a cost base that it regards as reliable.
b. A company uses a markup percentage that estimates a product price that covers full product costs and earns the required return on investment.
c. The selling price computed is only a prospective price.
d. The cost-plus price chosen has already been studied for customer reaction to the price.
Click here for the SOLUTION
Multiple Choice
Which of the following statements is FALSE regarding cost-plus pricing?
a. A company selects a cost base that it regards as reliable.
b. A company uses a markup percentage that estimates a product price that covers full product costs and earns the required return on investment.
c. The selling price computed is only a prospective price.
d. The cost-plus price chosen has already been studied for customer reaction to the price.
Click here for the SOLUTION
The markup percentage is usually higher if the cost base used is
ACCOUNTING
Multiple Choice
The markup percentage is usually higher if the cost base used is
a. the full cost of the product.
b. the variable cost of the product.
c. variable manufacturing costs.
d. total manufacturing costs.
Click here for the SOLUTION
Multiple Choice
The markup percentage is usually higher if the cost base used is
a. the full cost of the product.
b. the variable cost of the product.
c. variable manufacturing costs.
d. total manufacturing costs.
Click here for the SOLUTION
The amount of markup percentage is usually higher if
ACCOUNTING
Multiple Choice
The amount of markup percentage is usually higher if
a. there is idle capacity.
b. demand is strong.
c. competition is intense.
d. demand is elastic.
Click here for the SOLUTION
Multiple Choice
The amount of markup percentage is usually higher if
a. there is idle capacity.
b. demand is strong.
c. competition is intense.
d. demand is elastic.
Click here for the SOLUTION
__________ starts with estimated product costs and next adds desired operating income
ACCOUNTING
Multiple Choice
__________ starts with estimated product costs and next adds desired operating income
a. Cost-plus pricing
b. Target costing
c. Kaizen costing
d. Life-cycle budgeting
Click here for the SOLUTION
Multiple Choice
__________ starts with estimated product costs and next adds desired operating income
a. Cost-plus pricing
b. Target costing
c. Kaizen costing
d. Life-cycle budgeting
Click here for the SOLUTION
Erickson Company is considering pricing its 5,000-gallon petroleum tanks using either variable manufacturing or full product costs as the base
ACCOUNTING
Multiple Choice
Erickson Company is considering pricing its 5,000-gallon petroleum tanks using either variable manufacturing or full product costs as the base. The variable cost base provides a prospective price of $3,000 and the full cost base provides a prospective price of $3,050. The difference between the two prices is
a. the estimated amount of profit.
b. that the variable cost base estimates fixed costs in the markup percentage while the full cost base includes an amount for fixed costs.
c. known as price discrimination.
d. caused by the inability of most companies to estimate fixed cost per unit with any degree of reliability.
Click here for the SOLUTION
Multiple Choice
Erickson Company is considering pricing its 5,000-gallon petroleum tanks using either variable manufacturing or full product costs as the base. The variable cost base provides a prospective price of $3,000 and the full cost base provides a prospective price of $3,050. The difference between the two prices is
a. the estimated amount of profit.
b. that the variable cost base estimates fixed costs in the markup percentage while the full cost base includes an amount for fixed costs.
c. known as price discrimination.
d. caused by the inability of most companies to estimate fixed cost per unit with any degree of reliability.
Click here for the SOLUTION
A product's markup percentage needs to cover operating profits when the cost base is
ACCOUNTING
Multiple Choice
A product's markup percentage needs to cover operating profits when the cost base is
a. the full cost of the product.
b. the variable cost of the product.
c. variable manufacturing costs.
d. any of the above cost bases.
Click here for the SOLUTION
Multiple Choice
A product's markup percentage needs to cover operating profits when the cost base is
a. the full cost of the product.
b. the variable cost of the product.
c. variable manufacturing costs.
d. any of the above cost bases.
Click here for the SOLUTION
Saturday, September 17, 2011
A product's markup percentage needs to cover nonmanufacturing variable costs when the cost base is
ACCOUNTING
Multiple Choice
A product's markup percentage needs to cover nonmanufacturing variable costs when the cost base is
a. the full cost of the product.
b. the variable cost of the product.
c. variable manufacturing costs.
d. any of the above cost bases.
Click here for the SOLUTION
Multiple Choice
A product's markup percentage needs to cover nonmanufacturing variable costs when the cost base is
a. the full cost of the product.
b. the variable cost of the product.
c. variable manufacturing costs.
d. any of the above cost bases.
Click here for the SOLUTION
In cost-plus pricing, the markup component
ACCOUNTING
Multiple Choice
In cost-plus pricing, the markup component
a. is a rigid number.
b. is ultimately determined by the market.
c. provides a means to calculate the actual selling price.
d. is the end rather than the start of pricing decisions.
Click here for the SOLUTION
Multiple Choice
In cost-plus pricing, the markup component
a. is a rigid number.
b. is ultimately determined by the market.
c. provides a means to calculate the actual selling price.
d. is the end rather than the start of pricing decisions.
Click here for the SOLUTION
The cost-plus pricing approach is generally in the form:
ACCOUNTING
Multiple Choice
The cost-plus pricing approach is generally in the form:
a. Cost base + Markup component = Prospective selling price.
b. Prospective selling price - Cost base = Markup component.
c. Cost base + Gross margin = Prospective selling price.
d. Variable cost + Fixed cost + Contribution margin = Prospective selling price.
Click here for the SOLUTION
Multiple Choice
The cost-plus pricing approach is generally in the form:
a. Cost base + Markup component = Prospective selling price.
b. Prospective selling price - Cost base = Markup component.
c. Cost base + Gross margin = Prospective selling price.
d. Variable cost + Fixed cost + Contribution margin = Prospective selling price.
Click here for the SOLUTION
Value engineering can reduce costs by all EXCEPT
ACCOUNTING
Multiple Choice
Value engineering can reduce costs by all EXCEPT
a. simplifying the design and thereby decreasing the number of component parts.
b. reducing the number of features offered.
c. redesigning alternative options over and over until the wishes of all cross-functional team members are accommodated.
d. building efficiencies into value-added costs.
Click here for the SOLUTION
Multiple Choice
Value engineering can reduce costs by all EXCEPT
a. simplifying the design and thereby decreasing the number of component parts.
b. reducing the number of features offered.
c. redesigning alternative options over and over until the wishes of all cross-functional team members are accommodated.
d. building efficiencies into value-added costs.
Click here for the SOLUTION
Graphic analysis of incurred and locked-in costs provides several insights as to how the different concepts influence decisions
ACCOUNTING
Multiple Choice
Graphic analysis of incurred and locked-in costs provides several insights as to how the different concepts influence decisions. Which of the following statements is FALSE?
a. Costs are generally locked in before they are incurred.
b. After a product's design has been approved, costs are difficult to influence.
c. When and how costs are locked in are more important than when and how costs are incurred.
d. Most costs are locked in during the manufacturing process.
Click here for the SOLUTION
Multiple Choice
Graphic analysis of incurred and locked-in costs provides several insights as to how the different concepts influence decisions. Which of the following statements is FALSE?
a. Costs are generally locked in before they are incurred.
b. After a product's design has been approved, costs are difficult to influence.
c. When and how costs are locked in are more important than when and how costs are incurred.
d. Most costs are locked in during the manufacturing process.
Click here for the SOLUTION
A graph comparing locked-in costs with incurred costs will have
ACCOUNTING
Multiple Choice
A graph comparing locked-in costs with incurred costs will have
a. locked-in costs rising much faster initially, but dropping to zero after the product is manufactured.
b. the two cost lines running parallel until the end of the process, when they join.
c. locked-in costs rising much faster initially than the incurred cost, but joining the incurred cost line at the completion of the value-chain functions.
d. no differences unless the product is manufactured inefficiently.
Click here for the SOLUTION
Multiple Choice
A graph comparing locked-in costs with incurred costs will have
a. locked-in costs rising much faster initially, but dropping to zero after the product is manufactured.
b. the two cost lines running parallel until the end of the process, when they join.
c. locked-in costs rising much faster initially than the incurred cost, but joining the incurred cost line at the completion of the value-chain functions.
d. no differences unless the product is manufactured inefficiently.
Click here for the SOLUTION
Value engineering can reduce all EXCEPT
ACCOUNTING
Multiple Choice
Value engineering can reduce all EXCEPT
a. existing fixed manufacturing costs.
b. value-added costs.
c. nonvalue-added costs.
d. rework-hours.
Click here for the SOLUTION
Multiple Choice
Value engineering can reduce all EXCEPT
a. existing fixed manufacturing costs.
b. value-added costs.
c. nonvalue-added costs.
d. rework-hours.
Click here for the SOLUTION
In some industries such as legal and consulting, most costs are locked in
ACCOUNTING
Multiple Choice
In some industries such as legal and consulting, most costs are locked in
a. when they are incurred.
b. during the design stage.
c. during the customer-service stage.
d. during the marketing stage.
Click here for the SOLUTION
Multiple Choice
In some industries such as legal and consulting, most costs are locked in
a. when they are incurred.
b. during the design stage.
c. during the customer-service stage.
d. during the marketing stage.
Click here for the SOLUTION
Cross-functional engineering teams may include
ACCOUNTING
Multiple Choice
Cross-functional engineering teams may include
a. marketing managers.
b. suppliers.
c. management accountants.
d. all of the above.
Click here for the SOLUTION
Multiple Choice
Cross-functional engineering teams may include
a. marketing managers.
b. suppliers.
c. management accountants.
d. all of the above.
Click here for the SOLUTION
__________ focuses on reducing costs during the manufacturing stage
ACCOUNTING
Multiple Choice
__________ focuses on reducing costs during the manufacturing stage
a. Target costing
b. Kaizen costing
c. Cost-plus pricing
d. Life-cycle costing
Click here for the SOLUTION
Multiple Choice
__________ focuses on reducing costs during the manufacturing stage
a. Target costing
b. Kaizen costing
c. Cost-plus pricing
d. Life-cycle costing
Click here for the SOLUTION
For most products, the majority of costs are incurred during the __________ business function of the value chain
ACCOUNTING
Multiple Choice
For most products, the majority of costs are incurred during the __________ business function of the value chain
a. design
b. manufacturing
c. customer-service
d. marketing
Click here for the SOLUTION
Multiple Choice
For most products, the majority of costs are incurred during the __________ business function of the value chain
a. design
b. manufacturing
c. customer-service
d. marketing
Click here for the SOLUTION
Most of a product’s life-cycle costs are locked in by decisions made during the __________ business function of the value chain
ACCOUNTING
Multiple Choice
Most of a product’s life-cycle costs are locked in by decisions made during the __________ business function of the value chain
a. design
b. manufacturing
c. customer-service
d. marketing
Click here for the SOLUTION
Multiple Choice
Most of a product’s life-cycle costs are locked in by decisions made during the __________ business function of the value chain
a. design
b. manufacturing
c. customer-service
d. marketing
Click here for the SOLUTION
Cost accounting systems focus on when costs
ACCOUNTING
Multiple Choice
Cost accounting systems focus on when costs
a. are incurred.
b. are locked in.
c. are paid for.
d. are used for setting prices for products and services.
Click here for the SOLUTION
Multiple Choice
Cost accounting systems focus on when costs
a. are incurred.
b. are locked in.
c. are paid for.
d. are used for setting prices for products and services.
Click here for the SOLUTION
Direct material costs are locked in when they are
ACCOUNTING
Multiple Choice
Direct material costs are locked in when they are
a. designed.
b. assembled.
c. sold.
d. delivered.
Click here for the SOLUTION
Multiple Choice
Direct material costs are locked in when they are
a. designed.
b. assembled.
c. sold.
d. delivered.
Click here for the SOLUTION
Concerns about target costing include all EXCEPT
ACCOUNTING
Multiple Choice
Concerns about target costing include all EXCEPT
a. cross-functional teams may add too many features.
b. excessive pressure is put on suppliers.
c. development time may decrease.
d. burnout of design engineers.
Click here for the SOLUTION
Multiple Choice
Concerns about target costing include all EXCEPT
a. cross-functional teams may add too many features.
b. excessive pressure is put on suppliers.
c. development time may decrease.
d. burnout of design engineers.
Click here for the SOLUTION
What is the target cost if the company wants to maintain its same income level, and marketing is correct (rounded to the nearest cent)?
ACCOUNTING
Multiple Choice
Frank’s Computer Monitors, Inc., currently sells 17” monitors for $270. It has costs of $210. A competitor is bringing a new 17” monitor to market that will sell for $225. Management believes it must lower the price to $225 to compete in the market for 17” monitors. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Frank’s Computer Monitor, Inc.’s sales are currently 10,000 monitors per year.
What is the target cost if the company wants to maintain its same income level, and marketing is correct (rounded to the nearest cent)?
a. $168.75
b. $170.45
c. $185.00
d. $210.00)
Click here for the SOLUTION
Multiple Choice
Frank’s Computer Monitors, Inc., currently sells 17” monitors for $270. It has costs of $210. A competitor is bringing a new 17” monitor to market that will sell for $225. Management believes it must lower the price to $225 to compete in the market for 17” monitors. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Frank’s Computer Monitor, Inc.’s sales are currently 10,000 monitors per year.
What is the target cost if the company wants to maintain its same income level, and marketing is correct (rounded to the nearest cent)?
a. $168.75
b. $170.45
c. $185.00
d. $210.00)
Click here for the SOLUTION
1. What is the change in operating income if marketing is correct and only the sales price is changed?
ACCOUNTING
Multiple Choice
Frank’s Computer Monitors, Inc., currently sells 17” monitors for $270. It has costs of $210. A competitor is bringing a new 17” monitor to market that will sell for $225. Management believes it must lower the price to $225 to compete in the market for 17” monitors. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Frank’s Computer Monitor, Inc.’s sales are currently 10,000 monitors per year.
What is the change in operating income if marketing is correct and only the sales price is changed?
a. $165,000
b. $45,000
c. $(165,000)
d. $(435,000)
Click here for the SOLUTION
Multiple Choice
Frank’s Computer Monitors, Inc., currently sells 17” monitors for $270. It has costs of $210. A competitor is bringing a new 17” monitor to market that will sell for $225. Management believes it must lower the price to $225 to compete in the market for 17” monitors. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Frank’s Computer Monitor, Inc.’s sales are currently 10,000 monitors per year.
What is the change in operating income if marketing is correct and only the sales price is changed?
a. $165,000
b. $45,000
c. $(165,000)
d. $(435,000)
Click here for the SOLUTION
What is the target cost if operating income is 25% of sales?
ACCOUNTING
Multiple Choice
Frank’s Computer Monitors, Inc., currently sells 17” monitors for $270. It has costs of $210. A competitor is bringing a new 17” monitor to market that will sell for $225. Management believes it must lower the price to $225 to compete in the market for 17” monitors. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Frank’s Computer Monitor, Inc.’s sales are currently 10,000 monitors per year.
What is the target cost if operating income is 25% of sales?
a. $56.25
b. $67.50
c. $168.75
d. $202.50
Click here for the SOLUTION
Multiple Choice
Frank’s Computer Monitors, Inc., currently sells 17” monitors for $270. It has costs of $210. A competitor is bringing a new 17” monitor to market that will sell for $225. Management believes it must lower the price to $225 to compete in the market for 17” monitors. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Frank’s Computer Monitor, Inc.’s sales are currently 10,000 monitors per year.
What is the target cost if operating income is 25% of sales?
a. $56.25
b. $67.50
c. $168.75
d. $202.50
Click here for the SOLUTION
What is the target cost if the company wants to maintain its same income level, and marketing is correct?
ACCOUNTING
Multiple Choice
Sheltar’s TV currently sells small televisions for $180. It has costs of $140. A competitor is bringing a new small television to market that will sell for $150. Management believes it must lower the price to $150 to compete in the market for small televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Sheltar’s sales are currently 100,000 televisions per year
What is the target cost if the company wants to maintain its same income level, and marketing is correct?
a. $112.50
b. $113.64
c. $123.34
d. $140.00
Click here for the SOLUTION
Multiple Choice
Sheltar’s TV currently sells small televisions for $180. It has costs of $140. A competitor is bringing a new small television to market that will sell for $150. Management believes it must lower the price to $150 to compete in the market for small televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Sheltar’s sales are currently 100,000 televisions per year
What is the target cost if the company wants to maintain its same income level, and marketing is correct?
a. $112.50
b. $113.64
c. $123.34
d. $140.00
Click here for the SOLUTION
What is the change in operating income if marketing is correct and only the sales price is changed?
ACCOUNTING
Multiple Choice
Sheltar’s TV currently sells small televisions for $180. It has costs of $140. A competitor is bringing a new small television to market that will sell for $150. Management believes it must lower the price to $150 to compete in the market for small televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Sheltar’s sales are currently 100,000 televisions per year
What is the change in operating income if marketing is correct and only the sales price is changed?
a. $1,100,000
b. $300,000
c. $(1,100,000)
d. $(2,900,000)
Click here for the SOLUTION
Multiple Choice
Sheltar’s TV currently sells small televisions for $180. It has costs of $140. A competitor is bringing a new small television to market that will sell for $150. Management believes it must lower the price to $150 to compete in the market for small televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Sheltar’s sales are currently 100,000 televisions per year
What is the change in operating income if marketing is correct and only the sales price is changed?
a. $1,100,000
b. $300,000
c. $(1,100,000)
d. $(2,900,000)
Click here for the SOLUTION
What is the target cost if target operating income is 25% of sales?
ACCOUNTING
Multiple Choice
Sheltar’s TV currently sells small televisions for $180. It has costs of $140. A competitor is bringing a new small television to market that will sell for $150. Management believes it must lower the price to $150 to compete in the market for small televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Sheltar’s sales are currently 100,000 televisions per year
What is the target cost if target operating income is 25% of sales?
a. $37.50
b. $45.00
c. $112.50
d. $135.00
Click here for the SOLUTION
Multiple Choice
Sheltar’s TV currently sells small televisions for $180. It has costs of $140. A competitor is bringing a new small television to market that will sell for $150. Management believes it must lower the price to $150 to compete in the market for small televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Sheltar’s sales are currently 100,000 televisions per year
What is the target cost if target operating income is 25% of sales?
a. $37.50
b. $45.00
c. $112.50
d. $135.00
Click here for the SOLUTION
What is the target cost for each interior door?
ACCOUNTING
Multiple Choice
After conducting a market research study, Schultz Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $60. The annual target sales volume for interior doors is 20,000. Schultz has target operating income of 20% of sales.
What is the target cost for each interior door?
a. $48
b. $58
c. $60
d. $45
Click here for the SOLUTION
Multiple Choice
After conducting a market research study, Schultz Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $60. The annual target sales volume for interior doors is 20,000. Schultz has target operating income of 20% of sales.
What is the target cost for each interior door?
a. $48
b. $58
c. $60
d. $45
Click here for the SOLUTION
What is the target cost?
ACCOUNTING
Multiple Choice
After conducting a market research study, Schultz Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $60. The annual target sales volume for interior doors is 20,000. Schultz has target operating income of 20% of sales.
What is the target cost?
a. $900,000
b. $960,000
c. $1,260,000
d. $1,008,000
Click here for the SOLUTION
Multiple Choice
After conducting a market research study, Schultz Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $60. The annual target sales volume for interior doors is 20,000. Schultz has target operating income of 20% of sales.
What is the target cost?
a. $900,000
b. $960,000
c. $1,260,000
d. $1,008,000
Click here for the SOLUTION
What is the target operating income?
ACCOUNTING
Multiple Choice
After conducting a market research study, Schultz Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $60. The annual target sales volume for interior doors is 20,000. Schultz has target operating income of 20% of sales.
What is the target operating income?
a. $240,000
b. $300,000
c. $192,000
d. $180,000
Click here for the SOLUTION
Multiple Choice
After conducting a market research study, Schultz Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $60. The annual target sales volume for interior doors is 20,000. Schultz has target operating income of 20% of sales.
What is the target operating income?
a. $240,000
b. $300,000
c. $192,000
d. $180,000
Click here for the SOLUTION
What are target sales revenues?
ACCOUNTING
Multiple Choice
After conducting a market research study, Schultz Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $60. The annual target sales volume for interior doors is 20,000. Schultz has target operating income of 20% of sales.
What are target sales revenues?
a. $960,000
b. $2,000,000
c. $1,200,000
d. none of the above
Click here for the SOLUTION
Multiple Choice
After conducting a market research study, Schultz Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $60. The annual target sales volume for interior doors is 20,000. Schultz has target operating income of 20% of sales.
What are target sales revenues?
a. $960,000
b. $2,000,000
c. $1,200,000
d. none of the above
Click here for the SOLUTION
The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced
ACCOUNTING
Multiple Choice
The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced at a low enough cost to provide adequate operating income is referred to as
a. cost-plus pricing.
b. target costing.
c. kaizen costing.
d. full costing.
Click here for the SOLUTION
Multiple Choice
The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced at a low enough cost to provide adequate operating income is referred to as
a. cost-plus pricing.
b. target costing.
c. kaizen costing.
d. full costing.
Click here for the SOLUTION
When target costing and target pricing are used together,
ACCOUNTING
Multiple Choice
When target costing and target pricing are used together,
a. the target cost is established first, then the target price.
b. the target cost is the estimated long-run cost that enables a product or service to achieve a desired profit.
c. the focus of target pricing is to undercut the competition.
d. target costs are generally higher than current costs.
Click here for the SOLUTION
Multiple Choice
When target costing and target pricing are used together,
a. the target cost is established first, then the target price.
b. the target cost is the estimated long-run cost that enables a product or service to achieve a desired profit.
c. the focus of target pricing is to undercut the competition.
d. target costs are generally higher than current costs.
Click here for the SOLUTION
All of the following are associated with target costing EXCEPT
ACCOUNTING
Multiple Choice
All of the following are associated with target costing EXCEPT
a. value engineering.
b. the markup component.
c. all value-chain business functions.
d. cross-functional teams.
Click here for the SOLUTION
Multiple Choice
All of the following are associated with target costing EXCEPT
a. value engineering.
b. the markup component.
c. all value-chain business functions.
d. cross-functional teams.
Click here for the SOLUTION
All of the following are true regarding target costing EXCEPT
ACCOUNTING
Multiple Choice
All of the following are true regarding target costing EXCEPT
a. improvements are implemented in small incremental amounts.
b. customer input is essential to the target costing process.
c. input is requested from suppliers and distributors.
d. a key goal is to minimize costs over the product’s useful life.
Click here for the SOLUTION
Multiple Choice
All of the following are true regarding target costing EXCEPT
a. improvements are implemented in small incremental amounts.
b. customer input is essential to the target costing process.
c. input is requested from suppliers and distributors.
d. a key goal is to minimize costs over the product’s useful life.
Click here for the SOLUTION
To design costs out of products is a goal of
ACCOUNTING
Multiple Choice
To design costs out of products is a goal of
a. cost-plus pricing.
b. target costing.
c. kaizen costing.
d. peak-load costing.
Click here for the SOLUTION
Multiple Choice
To design costs out of products is a goal of
a. cost-plus pricing.
b. target costing.
c. kaizen costing.
d. peak-load costing.
Click here for the SOLUTION
Value-added costs
ACCOUNTING
Multiple Choice
Value-added costs
a. are costs that a customer is unwilling to pay for.
b. include maintenance and repairs of the manufacturing equipment.
c. are reduced through improved efficiencies.
d. if eliminated increase profitability.
Click here for the SOLUTION
Multiple Choice
Value-added costs
a. are costs that a customer is unwilling to pay for.
b. include maintenance and repairs of the manufacturing equipment.
c. are reduced through improved efficiencies.
d. if eliminated increase profitability.
Click here for the SOLUTION
Value engineering may result in all of the following EXCEPT
ACCOUNTING
Multiple Choice
Value engineering may result in all of the following EXCEPT
a. improved product design.
b. changes in materials specifications.
c. increases in the quantity of nonvalue-added cost drivers.
d. the evaluation of all business functions within the value chain.
Click here for the SOLUTION
Multiple Choice
Value engineering may result in all of the following EXCEPT
a. improved product design.
b. changes in materials specifications.
c. increases in the quantity of nonvalue-added cost drivers.
d. the evaluation of all business functions within the value chain.
Click here for the SOLUTION
Place the following steps for the implementation of target costing in order:
ACCOUNTING
Multiple Choice
Place the following steps for the implementation of target costing in order:
A = Derive a target cost
B = Develop a target price
C = Perform value engineering
D = Determine target operating income
a. B D A C
b. B A D C
c. A D B C
d. A B C D
Click here for the SOLUTION
Multiple Choice
Place the following steps for the implementation of target costing in order:
A = Derive a target cost
B = Develop a target price
C = Perform value engineering
D = Determine target operating income
a. B D A C
b. B A D C
c. A D B C
d. A B C D
Click here for the SOLUTION
Relevant costs for target pricing are
ACCOUNTING
Multiple Choice
Relevant costs for target pricing are
a. variable manufacturing costs.
b. variable manufacturing and variable nonmanufacturing costs.
c. all fixed costs.
d. all future costs, both variable and fixed.
Click here for the SOLUTION
Multiple Choice
Relevant costs for target pricing are
a. variable manufacturing costs.
b. variable manufacturing and variable nonmanufacturing costs.
c. all fixed costs.
d. all future costs, both variable and fixed.
Click here for the SOLUTION
The department usually in the best position to identify customers’ needs is the
ACCOUNTING
Multiple Choice
The department usually in the best position to identify customers’ needs is the
a. production department.
b. sales and marketing department.
c. design department.
d. distribution department.
Click here for the SOLUTION
Multiple Choice
The department usually in the best position to identify customers’ needs is the
a. production department.
b. sales and marketing department.
c. design department.
d. distribution department.
Click here for the SOLUTION
To understand how competitors might price competing products a company
ACCOUNTING
Multiple Choice
To understand how competitors might price competing products a company
a. needs to understand the competitor’s technologies and financial conditions.
b. may get information from suppliers that service the competitor.
c. may use reverse engineering.
d. may do all of the above.
Click here for the SOLUTION
Multiple Choice
To understand how competitors might price competing products a company
a. needs to understand the competitor’s technologies and financial conditions.
b. may get information from suppliers that service the competitor.
c. may use reverse engineering.
d. may do all of the above.
Click here for the SOLUTION
Target pricing
ACCOUNTING
Multiple Choice
Target pricing
a. is used for short-term pricing decisions.
b. is one form of cost-based pricing.
c. estimate is based on customers’ perceived value of the product.
d. relevant costs are all variable costs.
Click here for the SOLUTION
Multiple Choice
Target pricing
a. is used for short-term pricing decisions.
b. is one form of cost-based pricing.
c. estimate is based on customers’ perceived value of the product.
d. relevant costs are all variable costs.
Click here for the SOLUTION
For long-run pricing of the coffee tables, what price will MOST likely be used by Berryman?
ACCOUNTING
Multiple Choice
Berryman Products manufactures coffee tables. Berryman Products has a policy of adding a 20% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month:
Output units 30,000 tables
Machine-hours 8,000 hours
Direct manufacturing labor-hours 10,000 hours
Direct materials per unit $50
Direct manufacturing labor per hour $6
Variable manufacturing overhead costs $161,250
Fixed manufacturing overhead costs $600,000
Product and process design costs $450,000
Marketing and distribution costs $562,500
For long-run pricing of the coffee tables, what price will MOST likely be used by Berryman?
a. $67.38
b. $80.85
c. $111.13
d. $133.35
Click here for the SOLUTION
Multiple Choice
Berryman Products manufactures coffee tables. Berryman Products has a policy of adding a 20% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month:
Output units 30,000 tables
Machine-hours 8,000 hours
Direct manufacturing labor-hours 10,000 hours
Direct materials per unit $50
Direct manufacturing labor per hour $6
Variable manufacturing overhead costs $161,250
Fixed manufacturing overhead costs $600,000
Product and process design costs $450,000
Marketing and distribution costs $562,500
For long-run pricing of the coffee tables, what price will MOST likely be used by Berryman?
a. $67.38
b. $80.85
c. $111.13
d. $133.35
Click here for the SOLUTION
Berryman Products is approached by an overseas customer to fulfill a one-time-only special order for 2,000 units
ACCOUNTING
Multiple Choice
Berryman Products manufactures coffee tables. Berryman Products has a policy of adding a 20% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month:
Output units 30,000 tables
Machine-hours 8,000 hours
Direct manufacturing labor-hours 10,000 hours
Direct materials per unit $50
Direct manufacturing labor per hour $6
Variable manufacturing overhead costs $161,250
Fixed manufacturing overhead costs $600,000
Product and process design costs $450,000
Marketing and distribution costs $562,500
Berryman Products is approached by an overseas customer to fulfill a one-time-only special order for 2,000 units. All cost relationships remain the same except for a one-time setup charge of $20,000. No additional design, marketing, or distribution costs will be incurred. What is the minimum acceptable bid per unit on this one-time-only special order?
a. $67.38
b. $77.38
c. $111.13
d. $80.85
Click here for the SOLUTION
Multiple Choice
Berryman Products manufactures coffee tables. Berryman Products has a policy of adding a 20% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month:
Output units 30,000 tables
Machine-hours 8,000 hours
Direct manufacturing labor-hours 10,000 hours
Direct materials per unit $50
Direct manufacturing labor per hour $6
Variable manufacturing overhead costs $161,250
Fixed manufacturing overhead costs $600,000
Product and process design costs $450,000
Marketing and distribution costs $562,500
Berryman Products is approached by an overseas customer to fulfill a one-time-only special order for 2,000 units. All cost relationships remain the same except for a one-time setup charge of $20,000. No additional design, marketing, or distribution costs will be incurred. What is the minimum acceptable bid per unit on this one-time-only special order?
a. $67.38
b. $77.38
c. $111.13
d. $80.85
Click here for the SOLUTION
If the European customer wanted a long-term commitment for supplying this product, what price would MOST likely be quoted?
ACCOUNTING
Multiple Choice
Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Welch Manufacturing has a policy of adding a 10% markup to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers:
Variable costs:
Direct materials $30
Direct labor 10
Manufacturing overhead 15
Marketing costs 5
Fixed costs:
Manufacturing overhead 100
Marketing costs 20
Total costs 180
Markup (10%) 18
Estimated selling price $198
If the European customer wanted a long-term commitment for supplying this product, what price would MOST likely be quoted?
a. $66.00
b. $180.00
c. $198.00
d. $217.80
Click here for the SOLUTION
Multiple Choice
Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Welch Manufacturing has a policy of adding a 10% markup to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers:
Variable costs:
Direct materials $30
Direct labor 10
Manufacturing overhead 15
Marketing costs 5
Fixed costs:
Manufacturing overhead 100
Marketing costs 20
Total costs 180
Markup (10%) 18
Estimated selling price $198
If the European customer wanted a long-term commitment for supplying this product, what price would MOST likely be quoted?
a. $66.00
b. $180.00
c. $198.00
d. $217.80
Click here for the SOLUTION
Monday, September 12, 2011
1. What is the full cost of the product per unit?
ACCOUNTING
Multiple Choice
Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Welch Manufacturing has a policy of adding a 10% markup to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers:
Variable costs:
Direct materials $30
Direct labor 10
Manufacturing overhead 15
Marketing costs 5
Fixed costs:
Manufacturing overhead 100
Marketing costs 20
Total costs 180
Markup (10%) 18
Estimated selling price $198
What is the full cost of the product per unit?
a. $60
b. $180
c. $198
d. $66
Click here for the SOLUTION
Multiple Choice
Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Welch Manufacturing has a policy of adding a 10% markup to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers:
Variable costs:
Direct materials $30
Direct labor 10
Manufacturing overhead 15
Marketing costs 5
Fixed costs:
Manufacturing overhead 100
Marketing costs 20
Total costs 180
Markup (10%) 18
Estimated selling price $198
What is the full cost of the product per unit?
a. $60
b. $180
c. $198
d. $66
Click here for the SOLUTION
For Welch Manufacturing, what is the minimum acceptable price of this one-time-only special order?
ACCOUNTING
Multiple Choice
Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Welch Manufacturing has a policy of adding a 10% markup to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers:
Variable costs:
Direct materials $30
Direct labor 10
Manufacturing overhead 15
Marketing costs 5
Fixed costs:
Manufacturing overhead 100
Marketing costs 20
Total costs 180
Markup (10%) 18
Estimated selling price $198
For Welch Manufacturing, what is the minimum acceptable price of this one-time-only special order?
a. $40
b. $55
c. $60
Click here for the SOLUTION
Multiple Choice
Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Welch Manufacturing has a policy of adding a 10% markup to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers:
Variable costs:
Direct materials $30
Direct labor 10
Manufacturing overhead 15
Marketing costs 5
Fixed costs:
Manufacturing overhead 100
Marketing costs 20
Total costs 180
Markup (10%) 18
Estimated selling price $198
For Welch Manufacturing, what is the minimum acceptable price of this one-time-only special order?
a. $40
b. $55
c. $60
Click here for the SOLUTION
If Ms. Yukki wanted a long-term commitment for supplying this product, what price would MOST likely be quoted?
ACCOUNTING
Multiple Choice
Rogers’ Heaters is approached by Ms. Yukki, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Rogers’ Heaters has excess capacity. The following per unit data apply for sales to regular customers:
Direct materials $200
Direct manufacturing labor 60
Variable manufacturing support 30
Fixed manufacturing support 100
Total manufacturing costs 390
Markup (30%) 117
Estimated selling price $507
If Ms. Yukki wanted a long-term commitment for supplying this product, what price would MOST likely be quoted?
a. $290
b. $390
c. $260
d. $507
Click here for the SOLUTION
Multiple Choice
Rogers’ Heaters is approached by Ms. Yukki, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Rogers’ Heaters has excess capacity. The following per unit data apply for sales to regular customers:
Direct materials $200
Direct manufacturing labor 60
Variable manufacturing support 30
Fixed manufacturing support 100
Total manufacturing costs 390
Markup (30%) 117
Estimated selling price $507
If Ms. Yukki wanted a long-term commitment for supplying this product, what price would MOST likely be quoted?
a. $290
b. $390
c. $260
d. $507
Click here for the SOLUTION
Before accepting this one-time-only special order, Rogers’ Heaters should consider the impact on
ACCOUNTING
Multiple Choice
Rogers’ Heaters is approached by Ms. Yukki, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Rogers’ Heaters has excess capacity. The following per unit data apply for sales to regular customers:
Direct materials $200
Direct manufacturing labor 60
Variable manufacturing support 30
Fixed manufacturing support 100
Total manufacturing costs 390
Markup (30%) 117
Estimated selling price $507
Before accepting this one-time-only special order, Rogers’ Heaters should consider the impact on
a. current plant capacity.
b. long-term customers.
c. competitors.
d. all of the above.
Click here for the SOLUTION
Multiple Choice
Rogers’ Heaters is approached by Ms. Yukki, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Rogers’ Heaters has excess capacity. The following per unit data apply for sales to regular customers:
Direct materials $200
Direct manufacturing labor 60
Variable manufacturing support 30
Fixed manufacturing support 100
Total manufacturing costs 390
Markup (30%) 117
Estimated selling price $507
Before accepting this one-time-only special order, Rogers’ Heaters should consider the impact on
a. current plant capacity.
b. long-term customers.
c. competitors.
d. all of the above.
Click here for the SOLUTION
For Rogers’ Heaters, what is the minimum acceptable price of this one-time-only special order?
ACCOUNTING
Multiple Choice
Rogers’ Heaters is approached by Ms. Yukki, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Rogers’ Heaters has excess capacity. The following per unit data apply for sales to regular customers:
Direct materials $200
Direct manufacturing labor 60
Variable manufacturing support 30
Fixed manufacturing support 100
Total manufacturing costs 390
Markup (30%) 117
Estimated selling price $507
For Rogers’ Heaters, what is the minimum acceptable price of this one-time-only special order?
a. $290
b. $390
c. $260
d. $507
Click here for the SOLUTION
Multiple Choice
Rogers’ Heaters is approached by Ms. Yukki, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Rogers’ Heaters has excess capacity. The following per unit data apply for sales to regular customers:
Direct materials $200
Direct manufacturing labor 60
Variable manufacturing support 30
Fixed manufacturing support 100
Total manufacturing costs 390
Markup (30%) 117
Estimated selling price $507
For Rogers’ Heaters, what is the minimum acceptable price of this one-time-only special order?
a. $290
b. $390
c. $260
d. $507
Click here for the SOLUTION
1. A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style
ACCOUNTING
Multiple Choice
Northwoods manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $120 per table, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Northwoods’ policy to add a 50% markup to full costs.
A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style. Northwoods is invited to submit a bid to the hotel chain. What per unit price will Northwoods MOST likely bid on this long-term order?
a. $72 per unit
b. $108 per unit
c. $180 per unit
d. $120 per unit
Click here for the SOLUTION
Multiple Choice
Northwoods manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $120 per table, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Northwoods’ policy to add a 50% markup to full costs.
A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style. Northwoods is invited to submit a bid to the hotel chain. What per unit price will Northwoods MOST likely bid on this long-term order?
a. $72 per unit
b. $108 per unit
c. $180 per unit
d. $120 per unit
Click here for the SOLUTION
Northwoods is invited to bid on a one-time-only special order to supply 200 rustic tables
ACCOUNTING
Multiple Choice
Northwoods manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $120 per table, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Northwoods’ policy to add a 50% markup to full costs.
Northwoods is invited to bid on a one-time-only special order to supply 200 rustic tables. What is the lowest price Northwoods should bid on this special order?
a. $21,600
b. $7,200
c. $12,000
d. $14,400
Click here for the SOLUTION
Multiple Choice
Northwoods manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $120 per table, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Northwoods’ policy to add a 50% markup to full costs.
Northwoods is invited to bid on a one-time-only special order to supply 200 rustic tables. What is the lowest price Northwoods should bid on this special order?
a. $21,600
b. $7,200
c. $12,000
d. $14,400
Click here for the SOLUTION
For pricing decisions, full product costs
ACCOUNTING
Multiple Choice
For pricing decisions, full product costs
a. include all costs that are traceable to the product.
b. include all manufacturing and selling costs.
c. include all direct costs plus an appropriate allocation of the indirect costs of all business functions.
d. allow for the highest possible product prices.
Click here for the SOLUTION
Multiple Choice
For pricing decisions, full product costs
a. include all costs that are traceable to the product.
b. include all manufacturing and selling costs.
c. include all direct costs plus an appropriate allocation of the indirect costs of all business functions.
d. allow for the highest possible product prices.
Click here for the SOLUTION
A price-bidding decision for a one-time-only special order includes an analysis of
ACCOUNTING
Multiple Choice
A price-bidding decision for a one-time-only special order includes an analysis of
a. all manufacturing costs.
b. all cost drivers related to the product.
c. all direct and indirect variable costs of each function in the value chain.
d. all fixed manufacturing costs.
Click here for the SOLUTION
Multiple Choice
A price-bidding decision for a one-time-only special order includes an analysis of
a. all manufacturing costs.
b. all cost drivers related to the product.
c. all direct and indirect variable costs of each function in the value chain.
d. all fixed manufacturing costs.
Click here for the SOLUTION
For long-run pricing decisions, using stable prices has the advantage of
ACCOUNTING
Multiple Choice
For long-run pricing decisions, using stable prices has the advantage of
a. minimizing the need to monitor competitors' prices frequently.
b. reducing the need to change cost structures frequently.
c. reducing competition.
d. helping build buyer-seller relationships.
Click here for the SOLUTION
Multiple Choice
For long-run pricing decisions, using stable prices has the advantage of
a. minimizing the need to monitor competitors' prices frequently.
b. reducing the need to change cost structures frequently.
c. reducing competition.
d. helping build buyer-seller relationships.
Click here for the SOLUTION
Long-run pricing
ACCOUNTING
Multiple Choice
Long-run pricing
a. needs to cover only incremental costs.
b. only utilizes the market-based approach to pricing and not the cost-based approach.
c. is a strategic decision.
d. strives for flexible pricing that can respond to temporary changes in demand.
Click here for the SOLUTION
Multiple Choice
Long-run pricing
a. needs to cover only incremental costs.
b. only utilizes the market-based approach to pricing and not the cost-based approach.
c. is a strategic decision.
d. strives for flexible pricing that can respond to temporary changes in demand.
Click here for the SOLUTION
Which of the following factors should NOT be considered when pricing a special order?
ACCOUNTING
Multiple Choice
Which of the following factors should NOT be considered when pricing a special order?
a. The likely bids of competitors
b. The incremental cost of one unit of product
c. Revenues that will be lost on existing sales if prices are lowered
d. Stable pricing to earn the desired long-run return
Click here for the SOLUTION
Multiple Choice
Which of the following factors should NOT be considered when pricing a special order?
a. The likely bids of competitors
b. The incremental cost of one unit of product
c. Revenues that will be lost on existing sales if prices are lowered
d. Stable pricing to earn the desired long-run return
Click here for the SOLUTION
Relevant costs for pricing a special order include
ACCOUNTING
Multiple Choice
Relevant costs for pricing a special order include
a. existing fixed manufacturing overhead.
b. nonmanufacturing costs that will not change even if the special order is accepted.
c. additional setup costs for the special order.
d. all of the above costs.
Click here for the SOLUTION
Multiple Choice
Relevant costs for pricing a special order include
a. existing fixed manufacturing overhead.
b. nonmanufacturing costs that will not change even if the special order is accepted.
c. additional setup costs for the special order.
d. all of the above costs.
Click here for the SOLUTION
Short-term pricing decisions
ACCOUNTING
Multiple Choice
Short-term pricing decisions
a. use costs that may be irrelevant for long-term pricing decisions.
b. are more opportunistic.
c. tend to decrease prices when demand is strong.
d. have a time horizon of more than one year.
Click here for the SOLUTION
Multiple Choice
Short-term pricing decisions
a. use costs that may be irrelevant for long-term pricing decisions.
b. are more opportunistic.
c. tend to decrease prices when demand is strong.
d. have a time horizon of more than one year.
Click here for the SOLUTION
Long-run pricing decisions
ACCOUNTING
Multiple Choice
Long-run pricing decisions
a. have a time horizon of less than one year.
b. include adjusting product mix in a competitive environment.
c. and short-run pricing decisions generally have the same relevant costs.
d. use prices that include a reasonable return on investment.
Click here for the SOLUTION
Multiple Choice
Long-run pricing decisions
a. have a time horizon of less than one year.
b. include adjusting product mix in a competitive environment.
c. and short-run pricing decisions generally have the same relevant costs.
d. use prices that include a reasonable return on investment.
Click here for the SOLUTION
Three major influences on pricing decisions are
ACCOUNTING
Multiple Choice
Three major influences on pricing decisions are
a. competition, costs, and customers.
b. competition, demand, and production efficiency.
c. continuous improvement, customer satisfaction, and supply.
d. variable costs, fixed costs, and mixed costs.
Click here for the SOLUTION
Multiple Choice
Three major influences on pricing decisions are
a. competition, costs, and customers.
b. competition, demand, and production efficiency.
c. continuous improvement, customer satisfaction, and supply.
d. variable costs, fixed costs, and mixed costs.
Click here for the SOLUTION
In a competitive market with differentiated products like cameras, the key factor(s) affecting pricing decisions is/are
ACCOUNTING
Multiple Choice
In a competitive market with differentiated products like cameras, the key factor(s) affecting pricing decisions is/are
a. the customer’s willingness to pay.
b. the price charged for alternative products.
c. the cost of producing and delivering the product.
d. all of the above.
Click here for the SOLUTION
Multiple Choice
In a competitive market with differentiated products like cameras, the key factor(s) affecting pricing decisions is/are
a. the customer’s willingness to pay.
b. the price charged for alternative products.
c. the cost of producing and delivering the product.
d. all of the above.
Click here for the SOLUTION
In a noncompetitive environment, the key factor affecting pricing decisions is
ACCOUNTING
Multiple Choice
In a noncompetitive environment, the key factor affecting pricing decisions is
a. the customer’s willingness to pay.
b. the price charged for alternative products.
c. the cost of producing and delivering the product.
d. all of the above.
Click here for the SOLUTION
Multiple Choice
In a noncompetitive environment, the key factor affecting pricing decisions is
a. the customer’s willingness to pay.
b. the price charged for alternative products.
c. the cost of producing and delivering the product.
d. all of the above.
Click here for the SOLUTION
The cost of producing a product
ACCOUNTING
Multiple Choice
The cost of producing a product
a. is an important influence on pricing.
b. affects the willingness of a company to supply a product.
c. for pricing decisions includes manufacturing costs, but not product design costs.
d. in highly competitive markets controls pricing.
Click here for the SOLUTION
Multiple Choice
The cost of producing a product
a. is an important influence on pricing.
b. affects the willingness of a company to supply a product.
c. for pricing decisions includes manufacturing costs, but not product design costs.
d. in highly competitive markets controls pricing.
Click here for the SOLUTION
Fluctuations in exchange rates between different currencies can influence
ACCOUNTING
Multiple Choice
Fluctuations in exchange rates between different currencies can influence
a. the cost of products using foreign suppliers.
b. the pricing of alternative products offered by foreign competitors.
c. the demand for products of foreign competitors.
d. all of the above.
Click here for the SOLUTION
Multiple Choice
Fluctuations in exchange rates between different currencies can influence
a. the cost of products using foreign suppliers.
b. the pricing of alternative products offered by foreign competitors.
c. the demand for products of foreign competitors.
d. all of the above.
Click here for the SOLUTION
Competitors
ACCOUNTING
Multiple Choice
Competitors
a. with alternative products can force a company to lower its prices.
b. can gain a competitive pricing advantage with knowledge of your costs and operating policies.
c. may span international borders.
d. may be all of the above.
Click here for the SOLUTION
Multiple Choice
Competitors
a. with alternative products can force a company to lower its prices.
b. can gain a competitive pricing advantage with knowledge of your costs and operating policies.
c. may span international borders.
d. may be all of the above.
Click here for the SOLUTION
Companies must ALWAYS examine pricing
ACCOUNTING
Multiple Choice
Companies must ALWAYS examine pricing
a. based on the supply of the product.
b. based on the cost of producing the product.
c. through the eyes of their customers.
d. through the eyes of their competitors.
Click here for the SOLUTION
Multiple Choice
Companies must ALWAYS examine pricing
a. based on the supply of the product.
b. based on the cost of producing the product.
c. through the eyes of their customers.
d. through the eyes of their competitors.
Click here for the SOLUTION
Too high a price may
ACCOUNTING
Multiple Choice
Too high a price may
a. deter a customer from purchasing a product.
b. increase demand for the product.
c. indicate supply is too plentiful.
d. decrease a competitor’s market share.
Click here for the SOLUTION
Multiple Choice
Too high a price may
a. deter a customer from purchasing a product.
b. increase demand for the product.
c. indicate supply is too plentiful.
d. decrease a competitor’s market share.
Click here for the SOLUTION
Companies should ONLY produce and sell units as long as
ACCOUNTING
Multiple Choice
Companies should ONLY produce and sell units as long as
a. there is customer demand for the product.
b. the competition allows it.
c. the revenue from an additional unit exceeds the cost of producing it.
d. there is a generous supply of low-cost direct materials.
Click here for the SOLUTION
Multiple Choice
Companies should ONLY produce and sell units as long as
a. there is customer demand for the product.
b. the competition allows it.
c. the revenue from an additional unit exceeds the cost of producing it.
d. there is a generous supply of low-cost direct materials.
Click here for the SOLUTION
Collusive pricing occurs when companies in an industry conspire in their pricing and output decisions to achieve a price above the competitive price
ACCOUNTING
True or False
Collusive pricing occurs when companies in an industry conspire in their pricing and output decisions to achieve a price above the competitive price
Click here for the SOLUTION
True or False
Collusive pricing occurs when companies in an industry conspire in their pricing and output decisions to achieve a price above the competitive price
Click here for the SOLUTION
Price dumping occurs when a domestic company is trying to get rid of out-of-style products at a substantially reduced price
ACCOUNTING
True or False
Price dumping occurs when a domestic company is trying to get rid of out-of-style products at a substantially reduced price
Click here for the SOLUTION
True or False
Price dumping occurs when a domestic company is trying to get rid of out-of-style products at a substantially reduced price
Click here for the SOLUTION
A business that engages in predatory pricing violates various U.S. antitrust laws
ACCOUNTING
True or False
A business that engages in predatory pricing violates various U.S. antitrust laws
Click here for the SOLUTION
True or False
A business that engages in predatory pricing violates various U.S. antitrust laws
Click here for the SOLUTION
Price discrimination is only illegal if the intent is to destroy competition
ACCOUNTING
True or False
Price discrimination is only illegal if the intent is to destroy competition
Click here for the SOLUTION
True or False
Price discrimination is only illegal if the intent is to destroy competition
Click here for the SOLUTION
Price discrimination laws apply only to manufacturers
ACCOUNTING
True or False
Price discrimination laws apply only to manufacturers
Click here for the SOLUTION
True or False
Price discrimination laws apply only to manufacturers
Click here for the SOLUTION
When demand is strong, firms usually increase markups
ACCOUNTING
True or False
When demand is strong, firms usually increase markups
Click here for the SOLUTION
True or False
When demand is strong, firms usually increase markups
Click here for the SOLUTION
Price discrimination is the illegal practice of charging some customers a higher price than is charged to other customers
ACCOUNTING
True or False
Price discrimination is the illegal practice of charging some customers a higher price than is charged to other customers
Click here for the SOLUTION
True or False
Price discrimination is the illegal practice of charging some customers a higher price than is charged to other customers
Click here for the SOLUTION
When demand is elastic, an increase in price will lead to an increase in profits
ACCOUNTING
True or False
When demand is elastic, an increase in price will lead to an increase in profits
Click here for the SOLUTION
True or False
When demand is elastic, an increase in price will lead to an increase in profits
Click here for the SOLUTION
When price discrimination is effective, cost is not a major factor in setting prices
ACCOUNTING
True or False
When price discrimination is effective, cost is not a major factor in setting prices
Click here for the SOLUTION
True or False
When price discrimination is effective, cost is not a major factor in setting prices
Click here for the SOLUTION
Customer life-cycle costs focus on total costs incurred by the customer from purchase to disposal
ACCOUNTING
True or False
Customer life-cycle costs focus on total costs incurred by the customer from purchase to disposal
Click here for the SOLUTION
True or False
Customer life-cycle costs focus on total costs incurred by the customer from purchase to disposal
Click here for the SOLUTION
Many companies use life-cycle budgeting to determine target prices
ACCOUNTING
True or False
Many companies use life-cycle budgeting to determine target prices
Click here for the SOLUTION
True or False
Many companies use life-cycle budgeting to determine target prices
Click here for the SOLUTION
Life-cycle budgeting is particularly important when nonproduction costs are significant
ACCOUNTING
True or False
Life-cycle budgeting is particularly important when nonproduction costs are significant
Click here for the SOLUTION
True or False
Life-cycle budgeting is particularly important when nonproduction costs are significant
Click here for the SOLUTION
To be profitable, a company must generate revenues to cover costs incurred in all six business functions
ACCOUNTING
True or False
To be profitable, a company must generate revenues to cover costs incurred in all six business functions
Click here for the SOLUTION
True or False
To be profitable, a company must generate revenues to cover costs incurred in all six business functions
Click here for the SOLUTION
A full-cost base rather than a variable-cost base is a better guide for discounting decisions that may affect long-term customers
ACCOUNTING
True or False
A full-cost base rather than a variable-cost base is a better guide for discounting decisions that may affect long-term customers
Click here for the SOLUTION
True or False
A full-cost base rather than a variable-cost base is a better guide for discounting decisions that may affect long-term customers
Click here for the SOLUTION
The full-cost formula for pricing is relatively simple to use because it does not require a detailed analysis of cost behavior
ACCOUNTING
True or False
The full-cost formula for pricing is relatively simple to use because it does not require a detailed analysis of cost behavior
Click here for the SOLUTION
True or False
The full-cost formula for pricing is relatively simple to use because it does not require a detailed analysis of cost behavior
Click here for the SOLUTION
Markups tend to be lower in more competitive markets
ACCOUNTING
True or False
Markups tend to be lower in more competitive markets
Click here for the SOLUTION
True or False
Markups tend to be lower in more competitive markets
Click here for the SOLUTION
Sunday, September 11, 2011
Cost bases that include fewer costs also have lower markups
ACCOUNTING
True or False
Cost bases that include fewer costs also have lower markups
Click here for the SOLUTION
True or False
Cost bases that include fewer costs also have lower markups
Click here for the SOLUTION
The target rate of return on investment is another way of referring to the markup percentage
ACCOUNTING
True or False
The target rate of return on investment is another way of referring to the markup percentage
Click here for the SOLUTION
True or False
The target rate of return on investment is another way of referring to the markup percentage
Click here for the SOLUTION
In cost-plus pricing, the markup is a rigid number that determines the actual selling price
ACCOUNTING
True or False
In cost-plus pricing, the markup is a rigid number that determines the actual selling price
Click here for the SOLUTION
True or False
In cost-plus pricing, the markup is a rigid number that determines the actual selling price
Click here for the SOLUTION
Kaizen costing focuses on improving productivity and eliminating waste through continuous improvements
ACCOUNTING
True or False
Kaizen costing focuses on improving productivity and eliminating waste through continuous improvements
Click here for the SOLUTION
True or False
Kaizen costing focuses on improving productivity and eliminating waste through continuous improvements
Click here for the SOLUTION
Spending more on the design phase of a new product usually reduces subsequent product-related costs
ACCOUNTING
True or False
Spending more on the design phase of a new product usually reduces subsequent product-related costs
Click here for the SOLUTION
True or False
Spending more on the design phase of a new product usually reduces subsequent product-related costs
Click here for the SOLUTION
One goal of target costing is to design costs out of products
ACCOUNTING
True or False
One goal of target costing is to design costs out of products
Click here for the SOLUTION
True or False
One goal of target costing is to design costs out of products
Click here for the SOLUTION
For manufacturing firms, product costs are generally locked in during the manufacturing stage
ACCOUNTING
True or False
For manufacturing firms, product costs are generally locked in during the manufacturing stage
Click here for the SOLUTION
True or False
For manufacturing firms, product costs are generally locked in during the manufacturing stage
Click here for the SOLUTION
Suppliers play a key role in the success of target costing
ACCOUNTING
True or False
Suppliers play a key role in the success of target costing
Click here for the SOLUTION
True or False
Suppliers play a key role in the success of target costing
Click here for the SOLUTION
Value engineering seeks to reduce value-added costs as well as nonvalue-added costs
ACCOUNTING
True or False
Value engineering seeks to reduce value-added costs as well as nonvalue-added costs
Click here for the SOLUTION
True or False
Value engineering seeks to reduce value-added costs as well as nonvalue-added costs
Click here for the SOLUTION
It is always clear which activities add value and which do not add value to a product
ACCOUNTING
True or False
It is always clear which activities add value and which do not add value to a product
Click here for the SOLUTION
True or False
It is always clear which activities add value and which do not add value to a product
Click here for the SOLUTION
Value engineering has the objective of reducing costs while still satisfying customer needs
ACCOUNTING
True or False
Value engineering has the objective of reducing costs while still satisfying customer needs
Click here for the SOLUTION
True or False
Value engineering has the objective of reducing costs while still satisfying customer needs
Click here for the SOLUTION
The first step in target pricing is to determine the target cost of the product
ACCOUNTING
True or False
The first step in target pricing is to determine the target cost of the product
Click here for the SOLUTION
True or False
The first step in target pricing is to determine the target cost of the product
Click here for the SOLUTION
Product cost analysis is important even if market forces set prices
ACCOUNTING
True or False
Product cost analysis is important even if market forces set prices
Click here for the SOLUTION
True or False
Product cost analysis is important even if market forces set prices
Click here for the SOLUTION
Customers prefer stable and predictable prices over a long time horizon
ACCOUNTING
True or False
Customers prefer stable and predictable prices over a long time horizon
Click here for the SOLUTION
True or False
Customers prefer stable and predictable prices over a long time horizon
Click here for the SOLUTION
Relevant costs of a bidding decision should exclude revenues lost on lower-priced sales to existing customers
ACCOUNTING
True or False
Relevant costs of a bidding decision should exclude revenues lost on lower-priced sales to existing customers
Click here for the SOLUTION
True or False
Relevant costs of a bidding decision should exclude revenues lost on lower-priced sales to existing customers
Click here for the SOLUTION
Subscribe to:
Posts (Atom)