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Advanced Multiple Choice Quiz
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1Demand for a product is said to be elastic if a change in price has little effect on the number of units sold.
(Learning Objective 1 Ch 15)
A)True
B)False


2Fixed Overheads are £40,000; Direct Materials per unit £6; Direct Labour per unit £2, Budgeted Production 10,000 units; Mark up is 25% on full absorption cost. The unit Selling Price is:
(Learning Objective 2 Ch 15)
A)£7.50
B)£10
C)£15
D)£20


3Mark up is defined as:
(Learning Objective 3 Ch 15)
A)Profit as a percentage of selling price
B)Profit as a percentage of cost
C)Contribution as a percentage of selling price
D)Contribution as a percentage of cost


4Which of these is an advantage of the Absorption costing approach to pricing?
(Learning Objective 3 Ch 15)
A)It is simple
B)It is safe
C)Customers need the forecast sales
D)Customers will pay whatever price is asked.


5Using absorption cost based pricing ensures that the business will cover all its costs
(Learning Objective 3 Ch 15)
A)True
B)False


6One of the assumptions behind target costing is that
(Learning Objective 4 Ch 15)
A)cost is irrelevant.
B)the product has already been developed.
C)The company already know the price that will be charged
D)The company has control over the pricing


7Target pricing is useful where companies have little control over market prices
(Learning Objective 4 Ch 15)
A)True
B)False


8Time and Material pricing is NOT commonly used in one of the following
(Learning Objective 5 Ch 15)
A)Repair shops
B)Accountants
C)Plumbers
D)Manufacturing


9The technique of yield management is used in businesses that have which of the following characteristics? (More than one answer may be correct)
(Learning Objective 6 Ch 15)
A)High fixed costs
B)Perishability
C)High degree of automation
D)Limited capacity


10The North Division of Barter Company makes and sells a single product, which is a part used in manufacturing trucks. The annual production capacity is 35,000 units and the variable cost of each unit is £24. Presently the North Division sells 32,000 units per year to outside customers at £40 per unit. The South Division of Barter Company would like to buy 15,000 units a year from North to use in its production. There would be no savings in variable costs from transferring the units internally rather than selling them externally. The lowest acceptable average unit transfer price from the standpoint of the North Division would be closest to:
(Learning Objective 7 Ch 15)
A)£36.80
B)£24.00
C)£32.00
D)£40.00





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