NEW
Font size
WorksheetsTariff & Pricing
Total questions: 10
Worksheet time: 7mins
As a general rule of economics, companies should only produce and sell units as long as ________.
there is customer demand for the product
there is a relatively small supply of the product when compared to past operating periods
the revenue from an additional unit exceeds the cost of producing it
there is a generous supply of low-cost direct materials
Companies must always examine their pricing ________.
based on the supply of the product
based on the full cost of producing the product and price to make a profit
through the eyes of their customers and then manage costs to produce a profit
based on the GAAP cost of producing the product and then add a mark-up
Which of the following statements is true of costs and pricing decisions?
Companies get profit from selling products only when they are the price makers.
Companies supply products as long as the price the customer is willing to pay for its products exceeds the price that is charged by the competitor.
Companies supply products as long as there is a demand for the product in the market regardless of the price at which the products are sold.
Companies supply products as long as the revenues from selling the additional units exceed the cost of producing them.
Three major influences on pricing decisions are ________.
competition, costs, and customers
competition, demand, and production efficiency
continuous improvement, customer satisfaction, and supply
variable costs, fixed costs, and mixed costs
Which of the following are true regarding long-run pricing decisions?
they result in maximizing return on investment
they include adjusting product mix in a competitive environment
the price needs to be sufficient enough to break-even
use prices that include a reasonable return on invested capital
Which of the following explains the cost-plus approach to pricing decisions?
arriving at a price for the product based on the competitive pricing prevalent in the market
arriving at a price based on the perceived value to a customer given the cost of design and added features
arriving at a price based on the demand and supply trends in the market
arriving at a price that earns a target return on investment
Which of the following is true of target pricing?
it is used for short-term pricing decisions.
it is one form of cost-based pricing.
a price is an estimate of customers' perceived value of the product.
a price is calculated by adding a markup component to the cost base.
Which of the following is true of target costing?
the target cost is the target price minus the target operating income per unit
the target cost includes all past costs to produce the product
input from suppliers and distributors are not relevant.
a key goal is to minimize value added activities of a product.
After conducting a market research study, Magnificent Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $240. The annual target sales volume for interior doors is 21,000. Magnificent has target operating income of 20% of sales.
What is the target cost?
$6,048,000
$5,040,000
$4,032,000
$1,008,000
The cost-plus pricing approach is generally in the form ________.
Cost base + Markup component = Prospective selling price
Prospective selling price - Cost base = Markup component
Cost base + Gross margin = Prospective selling price
Variable cost + Fixed cost + Contribution margin = Prospective selling price
