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Exam 8: Relevant Information and Decision Making: Marketing Decisions

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Question 31

Multiple Choice

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The Chou Company provided the following information regarding its one and only product, rollers: -The unit cost of a roller using the contribution approach is

A) $16.50.
B) $5.00.
C) $14.50.
D) $11.50.

E) None of the above
F) C) and D)

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Question 32

Multiple Choice

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Each week Kline Company produces 800 units of a product that has variable costs of $8 per unit. Total fixed costs for the month are $6,800. A special order is received for 200 units of the same product at a price of $9 per unit. In deciding to accept or reject this special order, it is appropriate to consider the

A) difference between the offered price and the variable cost per unit, or $1.00.
B) old fixed cost per unit of $8.50.
C) new fixed cost per unit of $6.80.
D) difference between the two fixed costs per unit, which is $1.70.

E) A) and B)
F) B) and C)

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Question 33

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In the short run, the minimum price to be quoted for a product should be equal to the costs that may be avoided by not landing the order.

Van Horn, Inc. has been producing and selling 20,000 meters a year. The company has the capacity to produce 25,000 meters with its present facilities. The following information is also available: -The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced at a low enough cost to provide an adequate profit margin is referred to as

The contribution margin approach helps managers in pricing decisions because the relationships among variable costs, fixed costs and selling price changes are easier to show and understand.

Hartwig Company prepared the following budget for 20X4 for its product: Hartwig has a target profit of $105,000 for 20X4. -The average target profit percentage for setting prices as a percentage of total manufacturing costs would be

Van Horn, Inc. has been producing and selling 20,000 meters a year. The company has the capacity to produce 25,000 meters with its present facilities. The following information is also available: -If a special order is accepted for 5,000 meters at a price of $250 per unit, net income would

Unit costs are useful for predicting fixed costs, while total costs are useful for predicting variable costs.

In perfect competition, the profit-maximizing volume is the quantity at which

Costs that continue even if an operation is halted are

A cost that will NOT continue if an ongoing operation is changed or deleted is a(n)

Ellson Corp. has budgeted sales of $487,500 with the following budgeted costs: Compute the average target profit percentage for setting prices as a percentage of: a. Total manufacturing costs. b. Total variable costs. c. Prime costs. d. Total costs. e. Variable manufacturing costs.

Each month Barrett Company produces 4,000 units of a product that has variable costs of $10 per unit. Total fixed costs for the month are $14,800. A special order is received which is for 625 units at a price of $12 per unit. Relevant to the decision of whether to accept or reject this special order is the

The accountant's primary role in the decision-making process is to

Unavoidable costs will not continue if an ongoing operation is changed or deleted.

Ulmer Company has three product lines, X, Y, and Z. The following information is available: -Assuming Ulmer Company can increase the selling price of product Z to $10,000, all other information remaining constant, operating income will

Morrow, Inc. has three departments. Data for the most recent year is presented below: Required: a. Compute the operating income of the company. b. Compute the contribution margin and the operating income of each department. c. Should any department(s) be eliminated? Which one(s) and why?

Beem Corporation manufactures two products, X and Y. The following information was gathered: -Assume Beem Corporation could produce and sell any mix of product X and Y at full capacity. If product X takes twice as long to manufacture as product Y and only 200,000 hours of plant capacity are available, it is best for Beem to produce

Eagan Company has three product lines, A, B and C. The following information is available: -Assuming Eagan Company can increase the selling price of product B to $21,000, all other information remaining constant, operating income will

Assuming there is excess capacity, what would be the effect of accepting a special order for 2,000 units at a price of $64.00 per phone?