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| 1 | |
Which of the following has a major influence on pricing decisions? |
| | A) | Customer demand |
| | B) | Actions of competitors |
| | C) | Costs |
| | D) | all of the above |
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| 2 | |
Which of the following statements is false? |
| | A) | Product design issues and pricing considerations are interrelated. |
| | B) | In only a few industries, both market forces and cost considerations heavily influence prices. |
| | C) | Domestic and foreign competitors strive to sell their products to the same customer. |
| | D) | Collusion in price setting occurs when the major firms in an industry all agree to set their prices at high levels. |
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| 3 | |
Which of the following curves shows the relationship between the sales price and the quantity of units demanded? |
| | A) | Marginal cost curve |
| | B) | Marginal revenue curve |
| | C) | Demand curve |
| | D) | Total cost curve |
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| 4 | |
Which of the following curves shows the relationship between total sales revenue and the quantity sold? |
| | A) | Marginal cost curve |
| | B) | Marginal revenue curve |
| | C) | Total cost curve |
| | D) | Total revenue curve |
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| 5 | |
Which of the following curves shows the change in total revenues that accompanies a change in total quantity sold? |
| | A) | Marginal cost curve |
| | B) | Marginal revenue curve |
| | C) | Demand curve |
| | D) | Total cost curve |
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| 6 | |
Which of the following curves graphs the relationship between total cost and the quantity produced and sold each month? |
| | A) | Marginal cost curve |
| | B) | Marginal revenue curve |
| | C) | Demand curve |
| | D) | Total cost curve |
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| 7 | |
Which of the following curves shows the change in total cost that accompanies a change in the quantity produced and sold? |
| | A) | Marginal cost curve |
| | B) | Marginal revenue curve |
| | C) | Average revenue curve |
| | D) | Total cost curve |
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The 130-unit level may be referred to as which of the of the following? |
| | A) | Break-even point. |
| | B) | Cross-elasticity point. |
| | C) | Profit-maximizing quantity and price level. |
| | D) | Target price level. |
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| 9 | |
Which of the following statements is false? |
| | A) | Demand is inelastic if a price decrease has a large positive impact on sales quantity. |
| | B) | Demand is elastic if a price decrease has a large positive impact on sales volume. |
| | C) | Demand is inelastic if a price increase has little or no impact on sales quantity. |
| | D) | Demand is elastic if a price increase has a large negative impact on sales volume. |
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| 10 | |
Which of the following is a limitation of the profit-maximizing model? |
| | A) | The marginal-revenue, marginal-cost paradigm is not valid in all forms of market organization. |
| | B) | The firm's demand and marginal revenue curves are difficult to discern with precision. |
| | C) | Marginal cost is difficult to measure. |
| | D) | All of the above are true. |
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| 11 | |
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Using a markup percentage on variable manufacturing cost of 140%, calculate the selling price. |
| | A) | $1,200 |
| | B) | $700 |
| | C) | $1,900 |
| | D) | $1,100 |
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| 12 | |
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Using a markup percentage on absorption manufacturing cost of 65%, calculate the selling price. |
| | A) | $800 |
| | B) | $1,080 |
| | C) | $1,320 |
| | D) | $2,120 |
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| 13 | |
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Using a markup percentage on total cost of 35%, calculate the selling price. |
| | A) | $2,115 |
| | B) | $1,215 |
| | C) | $900 |
| | D) | $2,120 |
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| 14 | |
Most companies that use cost-plus pricing use either absorption manufacturing cost or total cost as the basis for pricing products and services. Which of the following is a general reason for this tendency? |
| | A) | Absorption-cost or total-cost pricing formulas provide a justifiable price that tends to be perceived as equitable to all parties, including consumers, |
| | B) | Cost-plus pricing based on full costs gives management an idea of how competitors with similar operations and cost structures may set prices. |
| | C) | Since absorption-cost information already exists, it is cost-effective to use it for pricing. |
| | D) | All of the above are reasons for companies to use either absorption manufacturing cost or total cost as the basis for pricing products and services. |
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| 15 | |
To avoid blurring the effects of cost behavior on profit, some managers prefer to use cost-plus pricing formulas based on either variable manufacturing costs or total variable costs. Which of the following is a disadvantage of using variable costs? |
| | A) | It provides exactly the type of information necessary to accept or reject a special order decision. |
| | B) | Variable costs are often perceived to be the floor for the price of a product or service. |
| | C) | The allocation of common fixed costs to individual products is not required with variable-cost data. |
| | D) | Variable-cost information is more consistent with cost-volume-profit analysis. |
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| 16 | |
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To the nearest tenth, what is the markup percentage using the cost-plus formula based on total costs? |
| | A) | 22.9% |
| | B) | 40.0% |
| | C) | 20.0% |
| | D) | 65.7% |
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| 17 | |
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To the nearest tenth, what is the markup percentage using the cost-plus formula based on total variable costs? |
| | A) | 22.9% |
| | B) | 65.7% |
| | C) | 115.0% |
| | D) | 153.3% |
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| 18 | |
The markup percentage under cost-plus pricing based on total variable cost is 115.0%. Total variable costs are $200,000 and total fixed costs are $150,000, based on a 500 unit annual volume. Use the total variable-cost pricing method and calculate the per-unit selling price. |
| | A) | $700 |
| | B) | $805 |
| | C) | $860 |
| | D) | $460 |
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| 19 | |
The markup percentage under cost-plus pricing based on total costs is 22.86%. Total variable costs are $200,000 and total fixed costs are $150,000, based on an annual volume of 500 units. Use the total-cost pricing method and calculate the selling price. |
| | A) | $700 |
| | B) | $805 |
| | C) | $860 |
| | D) | $460 |
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| 20 | |
Total variable manufacturing costs are $100,000 and total fixed costs are $150,000, based on an annual volume of 500 units. The markup percentage necessary to cover all fixed costs and provide a reasonable profit is 330.0%. Use the variable manufacturing-cost pricing method and calculate the selling price per unit. |
| | A) | $700 |
| | B) | $805 |
| | C) | $860 |
| | D) | $460 |
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| 21 | |
What is the numerator in the general formula for computing the markup percentage in cost-plus pricing to achieve a target return on investment (ROI)? |
| | A) | The profit required to achieve target ROI + Total annual costs not included in cost base. |
| | B) | The profit required to achieve target ROI + Total annual fixed costs. |
| | C) | The profit required to achieve target ROI + Total variable cost per unit. |
| | D) | The profit required to achieve target ROI + Total annual costs. |
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| 22 | |
Which of the following statement is false when summarizing cost-plus pricing? |
| | A) | Cost-plus pricing formulas are complex |
| | B) | Cost-plus pricing formulas establish a starting point in setting prices. |
| | C) | Cost-plus pricing formulas can be used with a variety of cost definitions. |
| | D) | Absorption-cost-plus or total-cost-plus pricing keeps managers focused on covering total costs. |
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| 23 | |
What is the pricing strategy of setting initial prices relatively low when introducing a new product to the market place called? |
| | A) | Predatory pricing. |
| | B) | Skimming pricing. |
| | C) | Penetration pricing. |
| | D) | Target costing. |
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| 24 | |
What is the pricing strategy of the initial product price high to reap short-run profits called? |
| | A) | Predatory pricing. |
| | B) | Penetration pricing. |
| | C) | Skimming pricing. |
| | D) | Target costing. |
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| 25 | |
Which of the following is a key principle of target costing? |
| | A) | Price-led costing |
| | B) | Focus on product design |
| | C) | Focus on process design |
| | D) | All of the above |
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| 26 | |
In which of the key principles of target costing is the effort focused on eliminating non-value-added costs. |
| | A) | Focus on customers |
| | B) | Focus on product design |
| | C) | Value-chain orientation |
| | D) | Life-cycle costs |
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| 27 | |
Which of the key principles of target costing focuses on the costs of product planning and concept design, preliminary design, detailed design and testing, production, distribution, and customer service? |
| | A) | Focus on customers |
| | B) | Focus on product design |
| | C) | Value-chain orientation |
| | D) | Life-cycle costs |
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| 28 | |
Which of the following statements is false when examining the roles of activity-based costing (ABC) in setting a target cost, how product-cost pricing can undermine a firm's pricing strategy, and the roll of value engineering in target costing? |
| | A) | Activity-based costing (ABC) enables designers to break down the production process of a new product into its component parts. |
| | B) | Use of a traditional, volume-based product-costing system seldom results in significant cost distortion among product lines. |
| | C) | Target costing is an outgrowth of the concept of value engineering. |
| | D) | A manufacturer's computer-aided design and cost-accounting software are interconnected under computer-integrated manufacturing (CIM), and the process of target costing is sometimes computerized. |
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What should be the hourly labor cost charged to jobs? |
| | A) | $23.00 |
| | B) | $ 7.00 |
| | C) | $17.42 |
| | D) | $33.50 |
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What should be the material handling and storagecost per dollar of material? |
| | A) | $0.01 |
| | B) | $0.10 |
| | C) | $1.00 |
| | D) | $1.10 |
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| 31 | |
In a competitive bidding situation, when the firm has excess capacity, which of the following is true about the bid price? |
| | A) | It should include a portion of fixed costs |
| | B) | It should include all of the fixed costs |
| | C) | It should exceed the variable cost of completing the product |
| | D) | It should be one dollar less than the normal price |
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| 32 | |
In a competitive bidding situation, when the firm has no excess capacity, the bid price should be which of the following? |
| | A) | Be greater than the total variable costs but less than total costs. |
| | B) | Equal to the opportunity costs. |
| | C) | At least equal to total costs |
| | D) | Never less than total costs |
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| 33 | |
What is the practice of temporarily reducing a price to broaden demand for a product, with the intention of later restricting the supply and raising the price? |
| | A) | Predatory pricing. |
| | B) | Skimming pricing. |
| | C) | Penetration pricing. |
| | D) | Target costing. |
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