Accounting Midterm 8,15,16
1. Under variable costing, fixed manufacturing overhead is: A. expensed immediately when incurred. B. never expensed. C. applied directly to Finished-Goods Inventory. D. applied directly to Work-in-Process Inventory. E. treated in the same manner as variable manufacturing overhead.
a
10. Santa Fe Corporation has computed the following unit costs for the year just ended: Direct material used $25 Direct labor 19 Variable manufacturing overhead 35 Fixed manufacturing overhead 40 Variable selling and administrative cost 17 Fixed selling and administrative cost 32 Which of the following choices correctly depicts the per-unit cost of inventory under variable costing and absorption costing? Variable Costing Absorption Costing A. $79 $119 B. $79 $151 C. $96 $119 D. $96 $151 E. Some other combination of figures not listed above
a
11. Delaware has computed the following unit costs for the year just ended: Variable manufacturing cost $85 Fixed manufacturing cost 20 Variable selling and administrative cost 18 Fixed selling and administrative cost 11 Which of the following choices correctly depicts the per-unit cost of inventory under variable costing and absorption costing? A. Variable, $85; absorption, $105. B. Variable, $85; absorption, $116. C. Variable, $103; absorption, $105. D. Variable, $103; absorption, $116. E. Some other combination of figures not listed above.
a
16. McAfee, which began business at the start of the current year, had the following data: Planned and actual production: 40,000 units Sales: 37,000 units at $15 per unit Production costs: Variable: $4 per unit Fixed: $260,000 Selling and administrative costs: Variable: $1 per unit Fixed: $32,000 The contribution margin that the company would disclose on an absorption-costing income statement is: A. $0. B. $147,000. C. $166,500. D. $370,000. E. some other amount.
a
16. Which of the following represents the cost-plus pricing formula? A. Price = cost + (markup percentage x cost). B. Price = cost + markup percentage. C. Price = markup percentage x cost. D. Price = cost ÷ markup percentage. E. Price = cost + (markup percentage + cost).
a
21. Aussie Company uses cost-plus pricing and has calculated total variable manufacturing cost, total absorption manufacturing cost, and total cost for one of its products. Which of these costs would be the smallest? A. Total variable manufacturing cost. B. Total absorption manufacturing cost. C. Total cost. D. There is no difference between choices "B" and "C." E. More information is needed to correctly answer the question.
a
23. When determining the markup to be used in a cost-plus pricing formula, many firms base the markup on a target: A. return on investment. B. sales margin. C. capital turnover. D. earnings per share. E. debt-to-equity ratio.
a
25. Which of the following conditions would cause absorption-costing net income to be lower than variable-costing net income? A. Units sold exceeded units produced. B. Units sold equaled units produced. C. Units sold were less than units produced. D. Sales prices decreased. E. Selling expenses increased.
a
26. Which of the following situations would cause variable-costing net income to be lower than absorption-costing net income? A. Units sold equaled 39,000 and units produced equaled 42,000. B. Units sold and units produced were both 42,000. C. Units sold equaled 55,000 and units produced equaled 49,000. D. Sales prices decreased by $7 per unit during the accounting period. E. Selling expenses increased by 10% during the accounting period.
a
3. All of the following are expensed under variable costing except: A. variable manufacturing overhead. B. fixed manufacturing overhead. C. variable selling and administrative costs. D. fixed selling and administrative costs. E. items "C" and "D" above
a
3. Which of the following is not a major influence on pricing decisions? A. Planning and control policies of the firm. B. Customer demand. C. Costs. D. Competitors. E. Political, legal, and image-related issues.
a
31. Montrose uses a 140% markup on total cost and recently computed a selling price of $1,560 for a particular product. On the basis of this information, the product's total cost is: A. $650.00. B. $910.00. C. $1,114.29. D. $2,184.00. E. some other amount.
a
33. For external-reporting purposes, generally accepted accounting principles require that net income be based on: A. absorption costing. B. variable costing. C. direct costing. D. semivariable costing. E. activity-based costing.
a
39. Which of the following terms describes a pricing strategy in which a new product's initial price is set relatively low in order to gain a large market share? A. Penetration pricing. B. Price skimming. C. Customer pricing. D. Designed pricing. E. Market-share pricing.
a
44. Which of the following features is typically absent in target costing? A. An approach that begins with the determination of a product or service's target cost. B. An approach that begins with the determination of a product or service's target selling price. C. A focus on the customer. D. A focus on product design. E. A focus on process design.
a
49. Montana produces bicycles in a highly competitive market. During the past year, the company has added a 30% markup on the $250 manufacturing cost for one of its most popular models. A new competitor manufactures a similar model, has established a $300 selling price, and is seriously eroding Montana's market share. Management now desires to use a target-costing approach to remain competitive and is willing to accept a 20% return on sales. If target costing is used, which of the following choices correctly denotes (1) the price that Montana will charge and (2) company's target cost? Selling Price Target Cost A. $300 $240 B. $300 $250 C. $325 $240 D. $325 $250 E. Some other combination of selling price and target cost.
a
62. If a firm has no excess capacity, which of the following is a sensible bidding strategy? A. Set a price to cover all costs. B. Base the bid on the incremental costs incurred because the job will contribute toward the company's profit. C. Base the bid solely on direct labor hours. D. Downplay the potential impact of competitors. E. Try to minimize the company's tax liability.
a
The curve that shows the change in total revenue that accompanies a change in quantity sold is called the: A. marginal revenue curve. B. average cost curve. C. profit curve. D. demand curve. E. revenue curve.
a
17. If a company uses a cost-plus approach to pricing, it will find: A. there are several different definitions of cost and the higher the cost, the higher the markup percentage. B. there are several different definitions of cost and the higher the cost, the lower the markup percentage. C. there is one definition of cost, and there is no relationship between cost and the markup percentage used. D. there is one definition of cost, and there is no markup percentage with the cost-plus approach. E. it is in violation of generally accepted accounting principles (GAAP).
b
19. Consider the following statements about absorption-cost pricing formulas: I. Absorption-cost formulas consider a company's fixed manufacturing costs when establishing a selling price. II. Absorption-cost formulas are often justified on the grounds that a company must cover all of its costs in the long run. III. Absorption-cost data are the type that managers need when facing certain pricing decisions, such as whether or not to accept a special order. Which of the above statements is (are) true? A. II only. B. I and II. C. I and III. D. II and III. E. I, II, and III.
b
19. Madison began business at the start of the current year. The company planned to produce 30,000 units, and actual production conformed to expectations. Sales totaled 28,000 units at $32 each. Costs incurred were: Fixed manufacturing overhead $150,000 Fixed selling and administrative cost 90,000 Variable manufacturing cost per unit 11 Variable selling and administrative cost per unit 2 If there were no variances, the company's variable-costing net income would be: A. $270,000. B. $292,000. C. $308,000. D. $532,000. E. some other amount.
b
20. The following data relate to Lobo Corporation for the year just ended: Sales revenue $750,000 Cost of goods sold: Variable portion 370,000 Fixed portion 110,000 Variable selling and administrative cost 50,000 Fixed selling and administrative cost 75,000 Which of the following statements is correct? A. Lobo's variable-costing income statement would reveal a gross margin of $270,000. B. Lobo's variable costing income statement would reveal a contribution margin of $330,000. C. Lobo's absorption-costing income statement would reveal a contribution margin of $330,000. D. Lobo's absorption costing income statement would reveal a gross margin of $330,000. E. Lobo's absorption-costing income statement would reveal a gross margin of $145,000.
b
22. The net income (loss) under variable costing is: A. $(7,500). B. $9,000. C. $15,000. D. $18,000. E. some other amount.
b
22. Which of the following formulas represents the markup percentage on total cost? A. Target profit ÷ annual volume. B. Target profit ÷ (annual volume x total cost per unit). C. (Annual volume x total cost per unit) ÷ target profit. D. Target profit ÷ variable cost. E. (Target profit x total cost per unit) ÷ annual volume.
b
23. Income reported under absorption costing and variable costing is: A. always the same. B. typically different. C. always higher under absorption costing. D. always higher under variable costing. E. always the same or higher under absorption costing.
b
24. Gomez's inventory increased during the year. On the basis of this information, income reported under absorption costing: A. will be the same as that reported under variable costing. B. will be higher than that reported under variable costing. C. will be lower than that reported under variable costing. D. will differ from that reported under variable costing, the direction of which cannot be determined from the information given. E. will be less than that reported in the previous period.
b
25. The following data pertain to Quigley Enterprises: Variable manufacturing cost $60 Variable selling and administrative cost 10 Applied fixed manufacturing cost 30 Allocated fixed selling and administrative cost 5 What price will the company charge if the firm uses cost-plus pricing based on total cost and a markup percentage of 60%? A. $63. B. $168. C. $175. D. $280. E. Some other amount.
b
29. Monex reported $65,000 of net income for the year by using absorption costing. The company had no beginning inventory, planned and actual production of 20,000 units, and sales of 18,000 units. Standard variable manufacturing costs were $20 per unit, and total budgeted fixed manufacturing overhead was $100,000. If there were no variances, net income under variable costing would be: A. $15,000. B. $55,000. C. $65,000. D. $75,000. E. $115,000.
b
32. Albany Company has average invested capital of $800,000 and a target return on investment of 15%. The total cost per unit is $20 based on a volume level of 25,000 units. Albany's markup percentage on total cost is: A. 9.375%. B. 24.0%. C. 47.5%. D. 62.5%. E. some other amount.
b
33. If the target profit is $60,000 for a volume of 480 units, fixed costs are $168,000, and the variable cost per unit is $450, then the markup percentage on variable cost would be: A. 104.56%. B. 105.56%. C. 106.00%. D. 106.45%. E. some other amount.
b
37. Which of the following terms describes a pricing strategy in which a new product's initial price is set high and then eventually lowered to appeal to a broader range of customers? A. Penetration pricing. B. Price skimming. C. Customer pricing. D. Designed pricing. E. Market-share pricing.
b
58. The amount to be added to each dollar of material cost to obtain the total material charge is: A. $0.06. B. $0.08. C. $0.10. D. $0.13. E. some other amount.
b
61. If a firm has excess capacity, which of the following is a sensible bidding strategy? A. Set a price to cover all costs. B. Base the bid on the incremental costs incurred because the job will contribute toward the company's profit. C. Base the bid solely on direct labor hours. D. Downplay the potential impact of competitors. E. Allocate common fixed costs to individual jobs before preparing the bid.
b
8. Lone Star has computed the following unit costs for the year just ended: Direct material used $12 Direct labor 18 Variable manufacturing overhead 25 Fixed manufacturing overhead 29 Variable selling and administrative cost 10 Fixed selling and administrative cost 17 Under variable costing, each unit of the company's inventory would be carried at: A. $35. B. $55. C. $65. D. $84. E. some other amount.
b
9. Prescott Corporation has computed the following unit costs for the year just ended: Direct material used $18 Direct labor 27 Variable manufacturing overhead 30 Fixed manufacturing overhead 32 Variable selling and administrative cost 9 Fixed selling and administrative cost 17 Under absorption costing, each unit of the company's inventory would be carried at: A. $75. B. $107. C. $116. D. $133. E. some other amount.
b
11. Which of the following statements regarding price elasticity is false? A. The concept of price elasticity is an extension of the economic pricing model. B. Demand is elastic if a price change has a large negative impact on sales volume. C. Demand is elastic if price changes have no impact on sales volume. D. Measuring price elasticity is an important objective of market research. E. Demand is relatively inelastic if price changes have little impact on sales quantity.
c
13. Consider the following statements regarding the economic pricing model: I. The economic model is limited in use because a firm's demand curve is difficult to determine. II. The marginal revenue and marginal cost model is valid for all forms of market organization (perfect competition, oligopoly, and so forth). III. Cost accounting systems are not designed to measure the marginal changes in cost incurred as production and sales increase. Which of the above statements is (are) true? A. I only. B. III only. C. I and III. D. II and III. E. I, II, and III.
c
15. Roberts, which began business at the start of the current year, had the following data: Planned and actual production: 40,000 units Sales: 37,000 units at $15 per unit Production costs: Variable: $4 per unit Fixed: $260,000 Selling and administrative costs: Variable: $1 per unit Fixed: $32,000 The gross margin that the company would disclose on an absorption-costing income statement is: A. $97,500. B. $147,000. C. $166,500. D. $370,000. E. some other amount.
c
17. Chicago began business at the start of the current year. The company planned to produce 25,000 units, and actual production conformed to expectations. Sales totaled 22,000 units at $30 each. Costs incurred were: Fixed manufacturing overhead $150,000 Fixed selling and administrative cost 100,000 Variable manufacturing cost per unit 8 Variable selling and administrative cost per unit 2 If there were no variances, the company's absorption-costing net income would be: A. $190,000. B. $202,000. C. $208,000. D. $220,000. E. some other amount.
c
18. Patterson and Clay Companies both use cost-plus pricing formulas and arrived at a selling price of $1,000 for the same product. Patterson uses absorption manufacturing cost as the basis for computing its dollar markup whereas Clay uses total cost. Which of the following choices correctly denotes the company that would have (1) the higher cost basis for deriving its dollar markup and (2) the higher markup percentage? Cost Basis Markup Percentage A. Patterson Patterson B. Patterson Clay C. Clay Patterson D. Clay Clay E. More information is needed to judge.
c
2. Which of the following choices correctly denotes factors that can influence a company's pricing practices for goods and services? Market Conditions Costs Customer Demand A. No Yes Yes B. No Yes No C. Yes Yes Yes D. Yes Yes No E. Yes No Yes
c
24. The following costs relate to Riley Company: Variable manufacturing cost, $42; variable selling and administrative cost, $10; applied fixed manufacturing overhead, $37; and allocated fixed selling and administrative cost, $12. If Riley uses absorption manufacturing-cost pricing formulas, the company's markup percentage would be computed on the basis of: A. $42. B. $52. C. $79. D. $101. E. some other amount.
c
28. Which of the following formulas can often reconcile the difference between absorption- and variable-costing net income? A. Change in inventory units x predetermined variable-overhead rate per unit. B. Change in inventory units ÷ predetermined variable-overhead rate per unit. C. Change in inventory units x predetermined fixed-overhead rate per unit. D. Change in inventory units ÷ predetermined fixed-overhead rate per unit. E. (Absorption-costing net income - variable-costing net income) x fixed-overhead rate per unit.
c
29. What price will the company charge if the firm uses cost-plus pricing based on absorption cost and a markup percentage of 120%? A. $420. B. $459. C. $594. D. $672. E. Some other amount.
c
30. What price will the company charge if the firm uses cost-plus pricing based on total cost and a markup percentage of 40%? A. $462. B. $513. C. $567. D. $594. E. Some other amount.
c
38. What is price skimming? A. The initial price is set low and kept constant. B. The initial price is set low and then raised. C. The initial price is set high and later lowered. D. The initial price is set high and kept constant. E. The initial price is set high and then raised.
c
40. Company A uses a pricing approach where the initial price for a product is set high and then lowered, and Company B uses an approach where initial prices are set low in an effort to gain market share. What terms best describe these practices? Company A Company B A. Predatory Skimming B. Penetration Predatory C. Skimming Penetration D. Skimming Predatory E. Predatory Penetration
c
42. The four tasks that follow take place in the concept known as target costing: 1—Value engineering. 2—Establish a target selling price. 3—Establish a target cost. 4—Establish a target profit. Which of the following choices depicts the correct sequence of these tasks? A. 1, 3, 4, 2. B. 3, 1, 4, 2. C. 2, 4, 3, 1. D. 2, 3, 1, 4. E. Some other sequence not listed above.
c
46. Franklin Electronics currently sells a camera for $240. An aggressive competitor has announced plans for a similar product that will be sold for $205. Franklin's marketing department believes that if the price is dropped to meet competition, unit sales will increase by 10%. The current cost to manufacture and distribute the camera is $175, and Franklin has a profit goal of 20% of sales. If Franklin meets competitive selling prices, what is the company's target cost? A. $41. B. $48. C. $164. D. $175. E. $192
c
48. Quantum Enterprises currently sells a piece of luggage for $200. An aggressive competitor has announced plans for a similar product that will be sold for $170. Quantum's marketing department believes that if the price is dropped to meet competition, unit sales will increase by 10%. The current cost to manufacture and distribute the luggage is $130, and Quantum has a profit goal of 30% of sales. If Quantum meets competitive selling prices, what must happen to the company's manufacturing and distribution cost? A. Nothing, because the costs are within defined ranges and can actually increase by $10. B. Nothing, because the costs are within defined ranges and can actually increase by $23. C. Costs must decrease by $11. D. Costs must decrease by $39. E. None of the above.
c
50. Consider the following statements about activity-based costing and its use in pricing: I. A company that uses target costing generally would have little need for activity-based costing. II. Companies that use cost-plus pricing methods would have little need for activity-based costing. III. The use of activity-based costing will often lead to better pricing decisions by managers. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. I and III. E. I, II, and III.
c
51. Which of the following management tools is a key component of target costing? A. Management simulation. B. Linear programming. C. Value engineering. D. Goal programming. E. Performance reporting systems.
c
55. With the time and material pricing method, the hourly time charge is typically set equal to: A. the hourly labor cost. B. the hourly labor cost + annual overhead. C. the hourly labor cost + an hourly overhead charge + an hourly charge to cover the profit margin. D. annual overhead + an hourly charge to cover the profit margin. E. the hourly labor cost + an hourly charge to cover the profit margin.
c
6. On a graph where the horizontal axis represents quantity sold and the vertical axis represents selling price, the basic demand curve in a competitive market can be graphed: A. as a horizontal line. B. as a vertical line. C. as a downward sloping line to the right. D. as an upward sloping line to the right. E. in the same manner as the total revenue curve.
c
6. The underlying difference between absorption costing and variable costing lies in the treatment of: A. direct labor. B. variable manufacturing overhead. C. fixed manufacturing overhead. D. variable selling and administrative expenses. E. fixed selling and administrative expenses.
c
63. Superior Company is involved in a competitive bidding situation. The following costs are anticipated for a project to be bid with the City of Southlake: Direct material $340,000 Direct labor 610,000 Allocated variable overhead 420,000 Allocated fixed cost 110,000 Which of the following cost figures should be used in setting a minimum bid price if Superior has excess capacity? A. $530,000. B. $950,000. C. $1,370,000. D. $1,480,000. E. Some other amount.
c
65. Overland Company is involved in a competitive bidding situation. Variable costs related to the project total $520,000, and allocated fixed overhead is $95,000. Which of the following cost figures should be used in setting a minimum bid price if Overland has (1) excess capacity and (2) no excess capacity? Excess Capacity No Excess Capacity A. $0 $0 B. $520,000 $520,000 C. $520,000 $615,000 D. $615,000 $520,000 E. $615,000 $615,000
c
67. Which of the following pricing practices is illegal? A. Penetration pricing. B. Price skimming. C. Predatory pricing. D. Cost-based pricing. E. Market-share pricing
c
Indiana Company incurred the following costs during the past year when planned production and actual production each totaled 20,000 units: Direct materials used $280,000 Direct labor 120,000 Variable manufacturing overhead 160,000 Fixed manufacturing overhead 100,000 Variable selling and administrative costs 60,000 Fixed selling and administrative costs 90,000 12. If Indiana uses variable costing, the total inventoriable costs for the year would be: A. $400,000. B. $460,000. C. $560,000. D. $620,000. E. $660,000.
c
The Razooks Company, which manufactures office equipment, is ready to introduce a new line of portable copiers. The following copier data are available: Variable manufacturing cost $180 Applied fixed manufacturing cost 90 Variable selling and administrative cost 60 Allocated fixed selling and administrative cost 75 27. What price will the company charge if the firm uses cost-plus pricing based on variable manufacturing cost and a markup percentage of 220%? A. $396.00 B. $495.00 C. $576.00 D. $643.50 E. Some other amount.
c
13. The per-unit inventoriable cost under absorption costing is: A. $9.50. B. $25.00. C. $28.00. D. $33.00. E. $40.50.
d
18. Norton, which began business at the start of the current year, had the following data: Planned and actual production: 40,000 units Sales: 37,000 units at $15 per unit Production costs: Variable: $4 per unit Fixed: $260,000 Selling and administrative costs: Variable: $1 per unit Fixed: $32,000 The contribution margin that the company would disclose on a variable-costing income statement is: A. $97,500. B. $147,000. C. $166,500. D. $370,000. E. some other amount.
d
2. All of the following are inventoried under variable costing except: A. direct materials. B. direct labor. C. variable manufacturing overhead. D. fixed manufacturing overhead. E. items "C" and "D" above
d
26. The following data pertain to Lopez Enterprises: Variable manufacturing cost $70 Variable selling and administrative cost 20 Applied fixed manufacturing cost 40 Allocated fixed selling and administrative cost 15 What price will the company charge if the firm uses cost-plus pricing based on absorption manufacturing cost and a markup percentage of 110%? A. $84. B. $147. C. $210. D. $231. E. Some other amount.
d
27. Consider the following statements about absorption- and variable-costing net income: I.Yearly income reported under absorption costing will differ from income reported under variable costing if production and sales volumes differ. II.Long-run, total income reported under absorption costing will often be close to that reported under variable costing. III.Differences in income under absorption and variable costing can often be reconciled by multiplying the change in inventory (in units) by the variable manufacturing overhead cost per unit. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. I and II. E. II and III.
d
28. What price will the company charge if the firm uses cost-plus pricing based on total variable cost and a markup percentage of 160%? A. $150. B. $384. C. $390. D. $624. E. Some other amount
d
30. Canyon reported $106,000 of net income for the year by using variable costing. The company had no beginning inventory, planned and actual production of 50,000 units, and sales of 47,000 units. Standard variable manufacturing costs were $15 per unit, and total budgeted fixed manufacturing overhead was $150,000. If there were no variances, net income under absorption costing would be: A. $52,000. B. $97,000. C. $106,000. D. $115,000. E. $160,000.
d
35. If Dexter uses cost-plus pricing based on absorption cost, the markup percentage the company must use would be: A. 15.72%. B. 21.64%. C. 29.56%. D. 58.93%. E. some other amount.
d
36. What price must Dexter charge if the company uses cost-plus pricing based on total variable cost? A. $712. B. $900. C. $1,030. D. $1,192. E. Some other amount.
d
41. Beehler Company, which desires to enter the market with a new product, will perform the following tasks: 1—Design and engineer the product. 2—Determine the product's cost. 3—Determine the desired profit margin. 4—Determine the suggested selling price. If Beehler uses target costing, which task would the company perform first? A. 1. B. 2. C. 3. D. 4. E. None of the above.
d
43. Mohawk Corporation manufactures a single product that has a cost of $350. The company uses a 70% markup on cost to arrive at a selling price of $595, which results in a price that virtually always exceeds that of the market leaders. If Mohawk changes to the approach known as target costing, the company will first: A. reduce its 70% markup rate. B. trim its $350 cost. C. attempt to re-engineer its product. D. undertake a thorough study of competitors' prices. E. change the markup so that it is based on sales rather than based on cost.
d
47. Hughes currently sells a mixer for $850 that market leaders sell for $815. The current costs to manufacture and distribute the mixer total $530, and the company has a profit goal of 40% of sales. Hughes uses target costing in its efforts to be a leader in the marketplace. On the basis of this information, (1) what should Hughes consider to be the initial driver of the target-costing process and (2) what amount of cost reduction is needed for the company to achieve its goals? Initial Driver Cost Reduction A. Current price of $850 $20 B. Current price of $850 $41 C. Market leaders' price of $815 $20 D. Market leaders' price of $815 $41 E. Market leaders' price of $815 Some other amount
d
5. All of the following are inventoried under absorption costing except: A. direct labor. B. raw materials used in production. C. utilities cost consumed in manufacturing. D. sales commissions. E. machine lubricant used in production.
d
5. The curve that shows the relationship between the sales price and quantity sold is called the: A. marginal revenue curve. B. average cost curve. C. profit curve. D. demand curve. E. revenue curve.
d
59. If a particular job takes 20 hours of labor and $800 of materials, the price charged for the job is: A. $1,380. B. $1,444. C. $1,530. D. $1,594. E. some other amount.
d
60. Consider the following statements about competitive bidding: I. The higher the price that a company bids, the greater the profit if the firm gets the contract. II. Bidding a higher price increases the probability of obtaining a contract. III. A company that bids low to ensure acceptance of a contract may actually wind up bidding too low to make an acceptable profit. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. I and III. E. I, II, and III.
d
64. Parkside Recreation is exploring a competitive bidding situation. The firm, which currently has no excess capacity, estimates the following costs for a project to be performed for the Morningside School District: Direct material $220,000 Direct labor 130,000 Allocated variable overhead 91,000 Allocated fixed cost 40,000 Which of the following cost figures would be used in determining a minimum price if Parkside decides to bid on the Morningside project? A. $131,000. B. $350,000. C. $441,000. D. $481,000. E. Some other amount.
d
8. From an economic perspective, a company's profit-maximizing quantity is found where: A. the total cost curve intersects with the marginal cost curve. B. the total revenue curve intersects with the average revenue curve. C. the marginal revenue curve intersects with the demand curve. D. the marginal revenue curve intersects with the marginal cost curve. E. the marginal cost curve intersects with the demand curve.
d
9. If the volume sold reacts strongly to changes in price, demand: A. has no elasticity. B. has negative elasticity. C. is inelastic. D. is elastic. E. is unrealistic.
d
Dexter, Inc., which manufactures various lines of computer equipment, is planning to introduce a new line of laptops. Current plans call for the production and sale of 1,000 units, with estimated production costs as follows: Variable costs: Manufacturing $450,000 Selling and administrative 100,000 Total variable costs $ 550,000 Fixed costs: Manufacturing $300,000 Selling and administrative 180,000 Total fixed costs 480,000 Total costs $1,030,000 The average amount of capital invested in the laptop product line is $900,000 and Dexter's target return on investment is 18%. 34. What price must Dexter charge if the company uses cost-plus pricing based on total cost? A. $868. B. $900. C. $1,000. D. $1,192. E. Some other amount.
d
Franz began business at the start of this year and had the following costs: variable manufacturing cost per unit, $9; fixed manufacturing costs, $60,000; variable selling and administrative costs per unit, $2; and fixed selling and administrative costs, $220,000. The company sells its units for $45 each. Additional data follow. Planned production in units 10,000 Actual production in units 10,000 Number of units sold 8,500 There were no variances. 21. The net income (loss) under absorption costing is: A. $(7,500). B. $9,000. C. $15,000. D. $18,000. E. some other amount
d
St. Paul Auto Repair uses time and material pricing. The body shop, which anticipates 10,000 direct labor hours of activity, has the following data: Annual overhead costs: Material handling and storage $ 15,000 Other overhead costs 75,000 Annual cost of materials used 187,500 Labor rate per hour, including fringe benefits 18 Hourly charge to achieve profit margin 11 57. The time charge per hour is: A. $19.50. B. $27.00. C. $29.00. D. $36.50. E. some other amount.
d
1. Which of the following can influence a company's pricing decisions? A. Manufacturing costs. B. Competitors. C. Customer demand. D. Pricing laws. E. All of the above.
e
10. Under which of the following condition(s) are prices said to be elastic? Price Change Change in Sales Volume A. Increase Sizable increase B. Increase Sizable decrease C. Decrease Sizable increase D. Decrease Sizable decrease E. Choices "B" and "C" are characteristic of elastic prices.
e
12. Prices are said to be inelastic under which of the following conditions? Price Change Change in Sales Volume A. Increase Sizable decrease B. Increase Little impact C. Decrease Sizable increase D. Decrease Little impact E. Choices "B" and "D" are characteristic of inelastic prices.
e
14. Consider the following comments about absorption- and variable-costing income statements: I.A variable-costing income statement discloses a firm's contribution margin. II.Cost of goods sold on an absorption-costing income statement includes fixed costs. III.The amount of variable selling and administrative cost is the same on absorption- and variable-costing income statements. Which of the above statements is (are) true? A. I only. B. II only. C. I and II. D. II and III. E. I, II, and III.
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14. In a typical business, the firm's overall demand would be influenced by interactions of pricing policies and: A. the company's reputation. B. the quality of goods and services offered. C. competing goods and services. D. advertising and promotional campaigns. E. all of the above factors.
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15. Consider the following statements about why prices are often based on product costs: I. Companies sell many products and services, and cost-based approaches provide a simple and direct pricing method. II. The cost of a product or service provides a lower limit or floor, below which price should not be set in the long run. III. Determining a company's demand and marginal revenue curves is difficult, costly, and time consuming. Which of the above statements is (are) true? A. I only. B. III only. C. I and III. D. II and III. E. I, II, and III.
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20. The difference between absorption manufacturing cost and total cost with respect to product pricing is caused by: A. variable manufacturing cost. B. applied fixed manufacturing cost. C. variable selling and administrative cost. D. allocated fixed selling and administrative cost. E. choices "C" and "D" above.
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31. Consider the following statements about absorption costing and variable costing: I.Variable costing is consistent with contribution reporting and cost-volume-profit analysis. II.Absorption costing must be used for external financial reporting. III.A number of companies use both absorption costing and variable costing. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. I and II. E. I, II, and III.
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32. Consider the following statements about absorption costing and variable costing: I.Variable costing is consistent with contribution reporting and cost-volume-profit analysis. II.Variable costing must be used for external financial reporting. III.A number of companies use both absorption costing and variable costing. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. I and II. E. I and III.
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4. All of the following costs are inventoried under absorption costing except: A. direct materials. B. direct labor. C. variable manufacturing overhead. D. fixed manufacturing overhead. E. fixed administrative salaries.
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4. Consider the following statements about pricing: I. Prices are often determined by the market, subject to the constraint that costs must be covered in the long run. II. Prices are often based on costs, subject to the constraint that customers and competitors will exert an influence. III. A balance of market forces and cost is important when making pricing decisions. Which of the above statements is (are) true? A. I only. B. II only. C. I and III. D. II and III. E. I, II, and III.
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45. Which of the following is (are) a key feature of target costing? A. The use of cross-functional teams. B. A focus on the customer. C. A focus on product design. D. A focus on process design. E. All of the above.
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52. Which of the following cost-reduction and process-improvement techniques is often used in conjunction with target costing? A. Linear programming. B. Deterministic simulations. C. Cost allocation. D. Budgetary padding. E. Value engineering
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53. Consider the following statements about time and material pricing: I. The time charge includes the direct cost of an employee's time. II. The time charge includes an amount to cover various overhead costs. III. The material charge includes a handling charge for material. Which of the above statements is (are) true? A. I only. B. I and II. C. I and III. D. II and III. E. I, II, and III.
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54. Under the time and material pricing method, a customer would be charged for: A. material costs. B. material and labor costs. C. material, labor, and overhead costs. D. material and labor costs, plus a profit margin. E. material, labor, and overhead costs, plus a profit margin.
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56. Glendale Corporation uses time and material pricing. The repair department expects 20,000 direct labor hours of activity and has the following selected data: Labor and fringe benefit costs $800,000 Overhead costs (excludes material handling and storage) 480,000 Target profit 220,000 The company's time charge per hour is: A. $11. B. $24. C. $40. D. $64. E. $75.
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66. Consider the following statements about pricing and the law: I. American antitrust laws restrict certain types of pricing behavior. II. The term "price discrimination" involves charging different prices to different customers for the same goods and services. III. Charging different prices to different customers for the same goods is permissible if price differences are based on cost differences of producing and/or selling the good. Which of the above statements is (are) true? A. I only. B. II only. C. I and II. D. II and III. E. I, II, and III.
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7. Which of the following costs would be treated differently under absorption costing and variable costing? Direct Labor Variable Manufacturing Overhead Fixed Administrative Expenses A. Yes No Yes B. Yes Yes Yes C. No Yes No D. No No Yes E. No No No
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