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
