I-Rev10 - LESSON 10 Review material Review questions...

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LESSON 10 Review material Review questions Question 1 — Multiple choice a. Fiddling Enterprises entered into a contract with one of its customers, which provided for a formula price of actual cost plus 20%. Fiddling is also entitled to receive 50% of any savings from the formula price being less than the target price of €4,500,000. Fiddling incurred actual costs of €3,600,000. How much should Fiddling receive from the contract? 1) €4,050,000 2) €4,320,000 3) €4,410,000 4) €4,500,000 b. What is a target cost? 1) The target cost is employed to avoid losses. 2) The target cost is the estimated long-run cost that enables a product or service to achieve a desired profit. 3) The target cost is set to undercut the competition. 4) Target costs are costs established to account for inflation over time. c. When a manager has to price a special order, this is called which of the following? 1) Careful pricing decision 2) Short-run decision 3) Medium-run decision 4) Long-run decision d. To help build buyer-seller relationships, the company should engage in which of the following? 1) Careful pricing decision 2) Short-run decision 3) Medium-run decision 4) Long-run decision e. Developing a product, setting target price, deriving target cost, and performing value engineering represent which of the following? 1) The steps for developing target prices and costs 2) The steps for developing the company’s strategy 3) The steps for developing a promotion plan 4) The four basic management skills Management Accounting Fundamentals Review material 10 1
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f. When calculating a markup percentage using a cost base that does not include fixed manufacturing costs, which of the following is true? 1) The variable costs used include only manufacturing costs. 2) An estimated production level is required to determine a unit cost. 3) An estimated sales volume is not required for the calculation. 4) An estimated required profit is used in the calculation. g. Domtar Company has invested €10,000,000 in a plant to make painting robots for automotive companies. The average long-run income desired from the plant is €1,500,000 annually. The annual cost base for each robot is €20,000. What should be the prospective selling price for each robot if the company uses a target return on investment as the markup base? 1) €20,000 2) €21,000 3) €22,000 4) €23,000 h. The current selling price for Pluto, a mid-sized car, is €19,000. For next year, it is anticipated that Pluto will have a €12,000 cost base. What is its prospective selling price if the company desires a markup component of 15%? 1) €10,200 2) €13,800 3) €19,000 4) €30,000 i. When firms are price setters, which of the following is true? 1) Pricing is influenced by competition, costs, and customer perception.
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I-Rev10 - LESSON 10 Review material Review questions...

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