accounting 2 exam

variable cost

(100%-contribution ratio) x unit price

Fixed cost

(unit price x units) x contribution margin

Contribution ratio %

(unit sale-variable)/unit sale

Which of the following is not a factor when using "Target Pricing"?

Determining the price of competitors so our price will be lower

Incremental analysis rarely requires the decision maker to exercise judgment.

False

The volume of output which causes fixed costs to be equal in amount to total revenue is called the break-even point.

False

With variable costs, the cost per unit varies with changes in volume.

False

The production schedule in units:

Is dependent upon the sales forecast for the period.

Unit Contribution Margin

Price per unit - Variable unit

The seller of a product is a price taker in which of the following environment?

Pure Competition

Sunk costs have already been incurred and cannot be changed by future actions.

The incremental cost of producing the order.

All incremental revenue or incremental costs are relevant.

True

Contribution margin is total revenue less variable costs.

True

Costs which increase in total amount in direct proportion to an increase in output are called variable costs.

True

Sunk costs have already been incurred and cannot be changed by future actions.

True

The term "out-of-pocket cost" is often used to describe costs which have not yet been incurred and which may vary among alternative courses of action.

True

Costs that rise and fall proportionately with the volume of output are often referred to as:

Variable cost

Static Budget

a projection of budget data at one level of activity

Oligopoly

a state of limited competition, in which a market is shared by a small number of producers or sellers.

flexible budget

adaptable to changes in operating conditions / levels of activity; 4 steps:

Life-cycle pricing:

attempts to establish a price that can be maintained throughout the life of the product

Break even

fixed cost/ (Sales price-variable cost)

break-even point

fixed/contribution ratio

The pricing strategy where a company initially sets the price of its product low and then raises it later on in the product's life cycle is called:

penetration pricing

The question of how many units of product to manufacture would be considered when preparing the:

production budget

Which of the following budgets is completed first?

sales