Pricing??

c. The company itself

In most cases, price is determined by:
a. Government only
b. Customers only
c. The company itself
d. Random assignment

b. Price takers

In a competitive market, firms are usually:
a. Price setters
b. Price takers
c. Monopoly holders
d. Government regulators

b. Minimizing and controlling costs

When firms are price takers, they mainly focus on:
a. Increasing selling price
b. Minimizing and controlling costs
c. Increasing taxes
d. Ignoring competitors

b. Adding markup to cost base

Cost-plus pricing means:
a. Selling below cost
b. Adding markup to cost base
c. Ignoring cost completely
d. Setting random prices

a. Cost base + markup

In cost-plus pricing, target selling price is determined by:
a. Cost base + markup
b. Demand only
c. Competitor behavior only
d. Government price control

a. Cost side only

Cost-plus pricing primarily focuses on:
a. Cost side only
b. Demand side only
c. Both cost and demand
d. Neither cost nor demand

b. Ignores whether customers are willing to pay

A limitation of cost-plus pricing is that it:
a. Always increases demand
b. Ignores whether customers are willing to pay
c. Eliminates cost
d. Guarantees profit

b. Fixed costs are spread over units

Sales volume affects unit cost because:
a. Fixed cost is ignored
b. Fixed costs are spread over units
c. Variable cost becomes zero
d. Demand disappears

b. Manufacturing cost as cost base

The absorption cost approach uses:
a. Only variable cost
b. Manufacturing cost as cost base
c. Market price only
d. Selling cost only

b. Uses manufacturing cost in valuation

Absorption costing is consistent with GAAP because it:
a. Ignores fixed cost
b. Uses manufacturing cost in valuation
c. Uses only sales price
d. Eliminates overhead

b. Compute markup percentage

In absorption cost pricing, the first step is to:
a. Set demand
b. Compute markup percentage
c. Compute selling price
d. Ignore costs

b. It uses existing general ledger cost data

One advantage of absorption costing in pricing is that:
a. It ignores accounting records
b. It uses existing general ledger cost data
c. It eliminates fixed costs
d. It ignores profit

a. Compute material loading charge

In time and material pricing, the first step is to:
a. Compute material loading charge
b. Set selling price randomly
c. Ignore labor cost
d. Compute profit margin first

b. Labor time and materials used

Time and material pricing combines:
a. Only materials
b. Labor time and materials used
c. Fixed cost only
d. Market demand only

b. Variable cost plus desired ROI and fixed cost

The markup in contribution approach is based on:
a. Selling price only
b. Variable cost plus desired ROI and fixed cost
c. Fixed cost only
d. Market price only

a. Variable cost behavior

Contribution approach focuses mainly on:
a. Variable cost behavior
b. External market forces only
c. Government regulation
d. Depreciation

b. Focus on controlling costs

In pricing decisions, companies operating in competitive markets should:
a. Ignore costs
b. Focus on controlling costs
c. Set any price they want
d. Avoid competition

b. Costs are known and stable

Cost-plus pricing is MOST suitable when:
a. Market is perfectly competitive
b. Costs are known and stable
c. No production exists
d. Prices are fixed by law only

b. May not reflect demand conditions

The main limitation of absorption cost pricing is that it:
a. Ignores fixed costs
b. May not reflect demand conditions
c. Eliminates accounting data
d. Reduces profit automatically

a. Cost, demand, and competition

Pricing decisions usually depend on:
a. Cost, demand, and competition
b. Only cost
c. Only demand
d. Only profit

d. all of these are factors.

Factors that can affect pricing decisions include all of the following except

a. cost considerations.

b. environment

c. pricing objectives

d. all of these are factors.

b. competitive market

In most cases, prices are set by the

a customer

b. competitive market

c. largest competitor

d. selling company

c. the long run

A company must price its product to cover its costs and earn a reasonable profit in

a all cases

b. in early years

c. the long run

d the short run.

d. a product is not easily distinguished from competing products.

Prices are set by the competitive market when

a. the product is specially made for a customer.

b. these are no other producers capable of manufacturing a similar item.

c. company can effectively differentiate its product from others

d. a product is not easily distinguished from competing products.

d is determined after the company sets its desired profit amount.

All of the following are correct statements about the target price except it

a. the price the company believes would place it in the optimal position for its target audience

b. is used to determine a product's target cost

c. Is determined after the company has identified its market and does market research

d. is determined after the company sets its desired profit amount.

C total unit cost+ desired ROA per unit

In cost-plus pricing the target selling price is computed as

a. variable cost per unit + desired ROI per unit

b. fixed cost per unit + desired ROI per unit

c. total unit cost+ desired ROA per unit

d. variable cost Per unit fixed manufacturing cost per unit + desired ROI per unit

b. total cost per unit

 In cost-plus pricing the markup percentage is computed by dividing the desired ROI per unit by the

a. fixed cost per unit

b. total cost per unit

c. total manufacturing cost per unit

d. variable cost per unit

c. it is simple to compute

The cost-plus pricing approach's major advantage is

a. it considers customer demand

b. that sales volume has no effect on per unit costs.

c. it is simple to compute

d. it can be used to determine a product's target cost

c. includes only variable costs in the cost base

AIl o the following are correct statement about the cost-plus pricing approach except that it

a. is simple to compute

b. considers customer demand

c. includes only variable costs in the cost base

d. will only work when the company sells the quantity it budgeted

c. total costs

In the cost-plus pricing approach, the desired ROI per unit is computed by multiplying the POI percentage by

a. fixed cost

b. total assets  

c. total costs

d. variable costs

c. labor charge per hour

The first step for time and material pricing is to calculate the

a. charge for obtaining materials

b. charge for holding materials

c. labor charge per hour

d. charges for a particular job

d. unit manufacturing cost.

The first step in the absorption cost approach is to compute the

a. desired ROI per unit

b. markup percentage

c. target selling price.

d. unit manufacturing cost.

c. selling and administrative expenses per unit by manufacturing cost per unit.

The markup percentage in the absorption cost approach is computed by dividing the sum of the desired ROI per unit and

a. fixed cost per unit by manufacturing cost per unit

b. fixed costs per unit by variable costs per unit.

c. selling and administrative expenses per unit by manufacturing cost per unit.

d. selling and administrative expenses per unit by variable costs per unit.

b. desired ROl and selling and administrative expenses.

In the absorption cost approach, the markup percentage covers the

a. desired ROl only.

b. desired ROl and selling and administrative expenses.

c. desired ROl and fixed costs

d. selling and administrative expenses only

d. this approach is more consistent with cost-volume-profit analysis.

The absorption cost approach is used by most companies for all of the following reasons except that

a. absorption cost information is readily provided by a company's cost accounting system.

b absorption cost provides the most defensible bases for justifying prices to interested parties.

c basing prices on only variable costs could encourage managers to set too low a price to boost sales.

d. this approach is more consistent with cost-volume-profit analysis.

b. 24%

48/200= 24%

The following per unit information is available for a new product of

Desired ROI 48

Fixed cost 80

Variable cost 120

Total cost 200

Selling price 248

Blue Ribbon Company- P 48 Blue Ribbon Company's markup percentage would be

a. 19%

b. 24%

c. 40%

d. 60

a. 186

150+36

Bryson Company has just developed a new product. The following data is available for this product

Desired ROI per unit 36

Fixed Cost per unit 60

Variable cost per unit 90

Total cost per unit 150

The target selling price for this product is

a. 186

b. 150

c. P126

d. 96

 

d. 30%

120/400=30%

Red Grass Company produces high definition television sets. The following information 's available for this product: Red Grass Company's markup percentage would be

Fixed cost per unit 100

Variable cost per unit 300

Total cost per unit 400

Desired ROI per unit 120

a. 120%

b. 60%

c. 40%

d. 30%

d. P520

400+120=520

Red Grass Company produces high definition television sets. The following information 's available for this product: Red Grass Company's markup percentage would be

Fixed cost per unit 100

Variable cost per unit 300

Total cost per unit 400

Desired ROI per unit 120

The target selling price for this television is

a. P220

b. P40

c. P420

d. P520

d. P70

250,000/5,000 = 50+20 = 70

The following data is available for Wheels 'N Spikes Repair Shop for 2018:

Repair technician's wages P180,000

Fringe benefits 40,000

Overhead 30.000

Total P250.000

The desired profit margin is P20 per labor hour. The material loading charge is 40% of invoice cost. It is estimated that 5,000 labor hours will be worked in 2018.

 Wheels 'N Spikes labor charge in 2018 would be

a. P50

b. P56

c.P6

d. P70

a P64

160×40% = 64

The following data is available for Wheels 'N Spikes Repair Shop for 2018:

Repair technician's wages P180,000

Fringe benefits 40,000

Overhead 30.000

Total P250.000

The desired profit margin is P20 per labor hour. The material loading charge is 40% of invoice cost. It is estimated that 5,000 labor hours will be worked in 2018.

In January 2018, Wheels 'N Spikes repairs a bicycle that uses parts of P160. Its material loading charge on this repair would be

a P64

b. P96

c. 160

d. 224

d. P308

140+120+48 = 308

The following data is available for Wheels 'N Spikes Repair Shop for 2018:

Repair technician's wages P180,000

Fringe benefits 40,000

Overhead 30.000

Total P250.000

The desired profit margin is P20 per labor hour. The material loading charge is 40% of invoice cost. It is estimated that 5,000 labor hours will be worked in 2018

in March 2018, Wheels 'N Spikes repairs a bicycle that takes two hours to repair and uses parts of P120. The bill for this repair would be

a. P260

b. P280

c. P296

d. P308

 

b. P130

160-30 = 130

Cuff budgets sales of its truck tires at P160 per tire and estimates that 10,000 tires can be sold during the coming year. Variable costs per tire are P50 and Cuff desires a profit of P30 per tire. The target cost per tire is

a. P160

b. P130

c. P80

d. P50

d. 200%

100/50% = 200%

Heny Company has developed a new product, egg crates that prevent breakage. The cost per crate is P50 and the company expects to sell 1,000 crates per year. Heny Company has invested P1,000,000 in equipment to produce the crates and desires a 10% return on investment. What is Heny Company's desired markup percentage?

a. 10%

b. 20%

c. 100%

d. 200%

b. P150

1,000,000×10% = 100,000/1,000 = 100+50 = 150

Heny Company has developed a new product, egg crates that prevent breakage. The cost per crate is P50 and the company expects to sell 1,000 crates per year. Heny Company has invested P1,000,000 in equipment to produce the crates and desires a 10% return on investment. What is Heny Company's selling price for one egg crate?

a P110

b. P150

c. P100

d. P250

d. 33.3%

20/60 = 33%

Cartridge Co. has produced a product with a total unit cost of P60 and a desired ROI Per unit of P20. If Cartridge Co.'s target selling price is P80 what is its Percentage markup on cost

a. 125%

b. 100%

c. 50%

d. 33.3%