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| 1 | |
The primary disadvantage of absorption cost pricing formulas is that: |
| | A) | they obscure the cost behaviour of the firm |
| | B) | they assist in the setting of long-term prices |
| | C) | they reflect the pricing information required for external reporting requirements |
| | D) | they provide a justifiable price that tends to be perceived as being equitable |
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| 2 | |
Skimming pricing is a pricing strategy for a new product where: |
| | A) | the initial product price is set high, reaping high short-term profits, then lowered over time |
| | B) | the initial product price is set relatively low to attract market share |
| | C) | the initial product price is set high and continues to be relatively high for the entire product lifecycle |
| | D) | the initial product price is set relatively low for a short period of time and then raised significantly |
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| 3 | |
The Trade Practices Act 1974 prohibits corporations from taking advantage of their market power to eliminate or substantially damage a competitor, to prevent entry of corporations into a market or to deter or prevent a corporation from competing in a market. Pricing practices that a corporation may use to take advantage of their market power include: |
| | A) | price-fixing contracts |
| | B) | price discrimination |
| | C) | resale price maintenance |
| | D) | all of the given answers |
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| 4 | |
The Fairfield Ladder Company manufactures tradesmen’s ladders used in the construction industry. The following per unit information is available: variable manufacturing cost of $200, fixed manufacturing cost of $80, variable selling and administration cost of $420, and fixed selling and administration cost of $25. <BR><BR>
The price that Fairfield should charge if it uses cost-plus pricing based on variable manufacturing cost and a markup percentage of 150% is: |
| | A) | $300 |
| | B) | $360 |
| | C) | $420 |
| | D) | $500 |
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| 5 | |
The Fairfield Ladder Company manufactures tradesmen’s ladders used in the construction industry. The following per unit information is available: variable manufacturing cost of $200, fixed manufacturing cost of $80, variable selling and administration cost of $40, and fixed selling and administration cost of $25. <BR><BR>
The price that Fairfield should charge if it uses cost-plus pricing based on total variable cost and a markup percentage of 120% is: |
| | A) | $240 |
| | B) | $288 |
| | C) | $336 |
| | D) | $528 |
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| 6 | |
The Fairfield Ladder Company manufactures tradesmen’s ladders used in the construction industry. The following per unit information is available: variable manufacturing cost of $200, fixed manufacturing cost of $80, variable selling and administration cost of $40, and fixed selling and administration cost of $25. <BR><BR>
The price that Fairfield should charge if it uses cost-plus pricing based on absorption cost and a markup percentage of 120% is: |
| | A) | $616 |
| | B) | $288 |
| | C) | $336 |
| | D) | $528 |
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| 7 | |
The Fairfield Ladder Company manufactures tradesmen’s ladders used in the construction industry. The following per unit information is available: variable manufacturing cost of $200, fixed manufacturing cost of $80, variable selling and administration cost of $40, and fixed selling and administration cost of $25. <BR><BR>
The price that Fairfield should charge if it uses cost-plus pricing based on total cost and a markup percentage of 60% is: |
| | A) | $207 |
| | B) | $345 |
| | C) | $552 |
| | D) | $621 |
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| 8 | |
How are the material charges calculated in time and material pricing? |
| | A) | Material cost incurred on job + [material cost incurred on job x (annual material handling and storage costs ÷ annual cost of materials used)]. |
| | B) | Material cost incurred on job + (material cost incurred on job x annual material handling and storage costs). |
| | C) | Material cost incurred on job + (material cost incurred on job x annual material handling and storage costs + annual cost of materials used). |
| | D) | Material cost incurred on job + (material cost incurred on job x annual cost of materials used). |
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| 9 | |
Ivanhoe Company is currently involved in a competitive bidding situation. Variable costs related to the project total $500 000, estimated fixed overhead is $120 000 and the target profit is $75 000. The lowest possible bid price that Ivanhoe can submit if Ivanhoe has excess capacity is: |
| | A) | $500 000 |
| | B) | $620 000 |
| | C) | $695 000 |
| | D) | $120 000 |
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| 10 | |
When a scarce resource such as machine hours exists in an organisation where multiple products are produced, the criterion that should be used to determine production is: |
| | A) | contribution margin per unit |
| | B) | contribution margin per unit of scarce resource |
| | C) | selling price per unit |
| | D) | gross margin per unit |
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