Horngren Cost Accounting 14e Solution Test Bank

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Cost Accounting, 14e (Horngren/Datar/Rajan)
Chapter 12 Pricing Decisions and Cost Management

Objective 12.1

1) Companies should only produce and sell units as long as:
A) there is customer demand for the product
B) the competition allows it
C) the revenue from an additional unit exceeds the cost of producing it
D) there is a generous supply of low-cost direct materials
Answer: C
Diff: 2
Terms: target price
Objective: 1
AACSB: Ethical reasoning

2) Too high a price may:
A) deter a customer from purchasing a product
B) increase demand for the product
C) indicate supply is too plentiful
D) decrease a competitor's market share
Answer: A
Diff: 1
Terms: target price
Objective: 1
AACSB: Reflective thinking

3) Companies must always examine their pricing:
A) based on the supply of the product
B) based on the cost of producing the product
C) through the eyes of their customers
D) through the eyes of their competitors
Answer: C
Diff: 3
Terms: target price
Objective: 1
AACSB: Ethical reasoning
4) Competitors:
A) with alternative products can force a company to lower its prices
B) can gain a competitive pricing advantage with knowledge of your costs and operating policies
C) may span international borders
D) All of these answers are correct.
Answer: D
Diff: 2
Terms: target price
Objective: 1
AACSB: Reflective thinking

6-36 (30 min.) Cash budgeting, chapter appendix.
1. Projected Sales
May June July August September October
Sales in units 80 120 200 100 60 40
Revenues (Sales in units × $450) $36,000 $54,000 $90,000 $45,000 $27,000
Collections of Receivables
May June July August September October
From sales in:
May (30% × $36,000) $10,800
June (50%; 30% × $54,000) 27,000 $16,200
July (20%; 50%; 30% × $90,000) 18,000 45,000 $27,000
August (20%; 50% × $45,000) 9,000