Acc 226 Test 1 Chps 11-13

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ACCOUNTING 226
TEST 1 CH 11-13

NAME DATE ______________________________________ __________

MULTIPLE CHOICE

1..Companies should ONLY produce and sell units as long as
c.the revenue from an additional unit exceeds the cost of producing it. 2.Too high a price may
a.deter a customer from purchasing a product.

3.Companies must ALWAYS examine pricing
c.through the eyes of their customers.

4.Value-added costs
c.are reduced through improved efficiencies.

5.Three major influences on pricing decisions are
a.competition, costs, and customers.

6. Relevant costs for pricing a special order include
c.additional setup costs for the special order.

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 7 AND 8.
Northwoods manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $120 per table, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Northwoods’ policy to add a 50% markup to full costs.

7.Northwoods is invited to bid on a one-time-only special order to supply 200 rustic tables. What is the lowest price Northwoods should bid on this special order?
d.$14,400

8.A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style. Northwoods is invited to submit a bid to the hotel chain. What per unit price will Northwoods MOST likely bid on this long-term order?

c.$180 per unit

9.Price discrimination is the practice of
d.charging different prices to different customers or clients for the same products or services.

10.Feedback regarding previous actions may affect
d.all of the above.

11. In evaluating different alternatives, it is useful to concentrate on
Answer is relevant cost

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 12 THROUGH 14. Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Welch Manufacturing has excess capacity. The following per unit data apply for sales to regular customers:

Variable costs:
Direct materials$40
Direct labor20
Manufacturing support35
Marketing costs15
Fixed costs:
Manufacturing support45
Marketing costs15
Total costs170
Markup (50%)85
Targeted selling price$255

12.What is the full cost of the product per unit?
b.$170

13.What is the contribution margin per unit?
c.$145

14. For Welch Manufacturing, what is the minimum acceptable price of this special order?
a.$110

15. Companies should ONLY produce and sell units as long as
c.the revenue from an additional unit exceeds the cost of producing it.

16. Three major influences on pricing decisions are
a.competition, costs, and customers.

17. Value engineering may result in all of the following EXCEPT
c.increases in the quantity of nonvalue-added cost drivers.

18. __________ focuses on reducing costs during the manufacturing stage.
b.Kaizen costing

11.Place the following steps from the five-step decision process in order:
A = Make predictions about future costs
B = Evaluate performance to provide feedback
C = Implement the decision
D = Choose an alternative
c.A D C B

12.The formal process of choosing between alternatives is known as
b.a decision model.

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 13 AND 14.
LeBlanc Lighting manufactures small flashlights and is considering raising the price by 50 cents a unit for the coming year. With a 50-cent price increase, demand is expected to fall by 3,000 units.

CurrentlyProjected
Demand 20,000 units17,000 units
Selling price$4.50$5.00
Incremental cost per unit $3.00$3.00

13If the price increase is implemented, operating...
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