ACCT434 Advanced Cost Management: Week 5 Pricing Decisions Management Control Systems (Version 4)

Reminder: There are several versions of this week’s questions, please make sure you have reviewed and compared our questions with your questions.

ACCT434 Advanced Cost Management
Week 5 Pricing Decisions Management Control Systems (Version 4)

1. (TCO 7) Short-run pricing decisions include
pricing a main product in a major market.
considering all costs in the value-chain of business functions.
adjusting product mix and volume in a competitive market while maintaining a stable price if demand fluctuates from strong to weak.
pricing for a special order with no long-term implications.

2. (TCO 7) The first step in implementing target pricing and target costing is
choosing a target price.
determining a target cost.
developing a product that satisfies needs of potential customers.
performing value engineering.

3. (TCO 7) A product's markup percentage needs to cover operating profits when the cost base is
variable manufacturing costs.
the full cost of the product.
the variable cost of the product.
All of the above

4. (TCO 7) An understanding of life-cycle costs can lead to
additional costs during the manufacturing cycle.
less need for evaluation of the competition.
cost-effective product designs that are easier to service.
mutually beneficial relationships between buyers and sellers.

5. (TCO 7) Each month, Haddon Company has $275,000 total manufacturing costs (20% fixed) and $125,000 distribution and marketing costs (36% fixed). Haddon's monthly sales are $500,000. The markup percentage on variable costs to arrive at the existing (target) selling price is
20%.
40%.
80%.
66 2/3 %.

6. (TCO 8) A benefit of using a market-based transfer price is
the profits of the transferring division are sacrificed for the overall good of the corporation.
the profits of the division receiving the products are sacrificed for the overall good of the corporation.
the economic viability and profitability of each division can be evaluated individually.
None of the above

7. (TCO 8) The costs used in cost-based transfer prices
are actual costs.
are budgeted costs.
can either be actual or budgeted costs.
are lower than the market-based transfer prices.

8. (TCO 8) Transferring products or services at market prices generally lead to optimal decisions when
the market for the intermediate product is perfectly competitive.
the interdependencies of the subunits are minimal.
there are no additional costs or benefits to the company in buying or selling in the external market.
All of the above

9. (TCO 8) The range over which two divisions will negotiate a transfer price is
between the supplying division's variable cost and the market price of the product.
between the supplying division's variable cost and its full cost of the product.
anywhere above the supplying division's full cost of the product.
between the supplying division's full cost and 180% above its full cost.

10. (TCO 8) Division A sells soybean paste internally to Division B, which in turn, produces soybean burgers that sell for $5 per pound. Division A incurs costs of $0.75 per pound while Division B incurs additional costs of $2.50 per pound.
What is Division A's operating income per pound, assuming the transfer price of the soybean paste is set at $1.25 per pound?
$0.50
$0.875
$1.250
$1.625
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