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Chapter 8 Self Test Managerial Accounting

Chapter 8 Self Test Managerial Accounting - Chapter 8 Self...

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Chapter 8 Self Test Managerial Accounting 1. The least difficult part of determining the profit maximizing price is determining the relationship between price and the quantity demanded. A. B. False This is referred to as the demand function which is the most difficult part of profit-maximizing pricing. 2. If a company has available capacity, fixed costs will be affected by special orders. A. B. False Fixed costs will not be affected in special orders because they are not incremental. Fixed costs will be incurred whether or not a special order is accepted. 1
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3. Cross-functional product development teams are not used in companies employing target costing, but are used in activity-based pricing systems. A. B. False Companies using target costing often use cross-functional product development teams to ensure good communication throughout the product development and pricing process. 4. Cost-plus pricing is inherently circular for manufacturing companies because the higher the demand, the lower the selling price. A. B. False You must estimate demand to determine fixed manufacturing costs per unit before you markup cost to obtain a price. However, the price affects the quantity demanded, so more units will be sold at lower prices, or fewer units at higher prices, causing the company to re- estimate demand and reset the price. 2
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5. Two customers that purchase exactly the same products may result in differing profits depending on what additional services were provided. A. B. False Customer profitability is affected not only by the cost of the product, but also due to services such as order processing, shipping, handling returns, etc. 6. Activity-based pricing is an approach to determine the cost of products or services provided to customers. A. B. False Activity-based pricing is an approach to pricing in which customers are presented with separate prices for services they requires in addition to the goods they purchase. 3
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7. Sandy Shores Sandals is determining the profit maximizing price for its men's Comfort sandals. The following has been determined from the demand schedule: sales of 1,000 units at $20 per unit, sales of 750 units at $25 per units. Variable costs are $10 per unit with fixed costs of $6,000. How much is the maximizing profit? A. B. $5,250 C. $10,000 D. $11,250
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