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. All of the above.
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.
Yes
Yes
Yes
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. Planning and control policies of the firm.
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 competit
E. I, II, and III.
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. demand curve.
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 t
C. as a downward sloping line to the right.
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. marginal revenue curve.
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 inter
D. the marginal revenue curve intersects with the marginal cost curve.
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. is elastic.
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 cha
E.
Choices "B" and "C" are characteristic of elastic prices.
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 elast
C. Demand is elastic if price changes have no impact on sales volume.
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 character
E.
Choices "B" and "D" are characteristic of inelastic prices.
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 orga
C. I and III.
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 campai
E. all of the above factors.
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
E. I, II, and III.
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 percent
A. Price = cost + (markup percentage x cost).
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
B. there are several different definitions of cost and the higher the cost, the lower the markup percentage.
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 o
C.
Clay
Patterson
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
B. I and II.
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
E. choices "C" and "D" above.
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. T
A. Total variable manufacturing cost.
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 � variab
B. Target profit � (annual volume x total cost per unit).
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. return on investment.
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 man
C. $79.
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. $650.00.
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%.
B. 24.0%.
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. 105.56%.
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
B. Price skimming.
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
C. The initial price is set high and later lowered.
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-sh
A. Penetration pricing.
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
Co
C.
Skimming
Penetration
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
D. 4.
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 t
C. 2, 4, 3, 1.
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 pric
A. An approach that begins with the determination of a product or service's target cost.
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.
E. All of the above.
Consider the following statements about activity-based costing and its use in pricing:
A company that uses target costing generally would have little need for activity-based costing.
Companies that use cost-plus pricing methods would have little need for
C. III only.
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. Value engineering.
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.
E. Value engineering.
Consider the following statements about time and material pricing:
The time charge includes the direct cost of an employee's time.
The time charge includes an amount to cover various overhead costs.
The material charge includes a handling charge for mater
E. I, II, and III.
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,
E. material, labor, and overhead costs, plus a profit margin.
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
C. the hourly labor cost + an hourly overhead charge + an hourly charge to cover the profit margin.
Consider the following statements about competitive bidding:
The higher the price that a company bids, the greater the profit if the firm gets the contract.
Bidding a higher price increases the probability of obtaining a contract.
A company that bids low
D. I and III.
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
B. Base the bid on the incremental costs incurred because the job will contribute toward the company's profit.
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 sole
A. Set a price to cover all costs.
Consider the following statements about pricing and the law:
American antitrust laws restrict certain types of pricing behavior.
The term "price discrimination" involves charging different prices to different customers for the same goods and services.
Cha
E. I, II, and III.
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. Predatory pricing.