>> Accounting Basics
1. Major influences of competitors, costs, and customers on pricing decisions are factors of
- supply and demand.
- activity-based costing and activity-based management.
- key management themes that are important to managers attaining success in their planning and control decisions.
- the value-chain concept.
2. The best opportunity for cost reduction is
- during the manufacturing phase of the value chain.
- during the product-process design phase of the value chain.
- during the marketing phase of the value chain.
- during the distribution phase of the value chain.
3. 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. Life-cycle costing is the name given to
- a method of cost planning to reduce manufacturing costs to targeted levels.
- the process of examining each component of a product to determine whether its cost can be reduced.
- the process of managing all costs along the value chain.
- a system that focuses on reducing costs during the manufacturing cycle.
5. 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 full cost to arrive at the target (existing) selling price is
6. The benefits of a decentralized organization are greater when a company
- is large and unregulated.
- is facing great uncertainties in their environment.
- has few interdependencies among division.
- All of the above
7. A transfer-pricing method leads to goal congruence when managers
- always act in their own best interest.
- act in their own best interest and the decision is in the long-term best interest of the manager's subunit.
- act in their own best interest and the decision is in the long-term best interest of the company.
- act in their own best interest and the decision is in the short-term best interest of the company.
8. When an industry has excess capacity, market prices may drop well below their historical average. If this drop is temporary, it is called
- distress prices.
- dropped prices.
- low-average prices.
- substitute prices.
9. 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. 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. Which of the following formulas correctly reflects the company's operating income per pound?
- $5.00 - ($1.25 + $2.50) = $1.25
- $5.00 - ($0.75 + $2.50) = $1.75
- $5.00 - ($0.75 + $3.75) = $0.50
- $5.00 - ($0.25 + $1.25 + $3.50) = 0