Chapter 12
Variable direct labor cost per unit
150
Variable factory overhead cost per unit
50
Variable selling and administrative cost per unit
30
If the total cost markup percentage per unit is 5.5%, determine the selling price per unit of the company’s product.
a.
$346
b.
$692
c.
$365
d.
$677
74. In using the total cost concept of applying the cost-plus approach to product pricing, what is included in the markup?
a.
Total selling and administrative expenses plus desired profit
b.
Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit
c.
Total costs plus desired profit
d.
Desired profit
Chapter 12
75. In which of the following pricing methods is the markup added to manufacturing costs and selling and expenses to
determine the selling price?
a.
Total cost method
b.
Product cost method
c.
Variable cost method
d.
Fixed cost method
76. The _____ is estimated as the difference between the expected selling price and the desired profit.
a.
target cost
b.
product cost
c.
sunk cost
d.
opportunity cost
Chapter 12
77. What pricing method is most likely to be used if there are several providers in the same market and there is sufficient
demand for the product?
a.
Demand-based method
b.
Total cost method
c.
Cost-plus method
d.
Competition-based method
78. In using the total cost concept of applying the cost-plus approach to product pricing, what is included in the cost
amount to which the markup is added?
a.
Total selling and administrative expenses plus desired profit
b.
Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit
c.
Total costs of manufacturing a product plus selling and administrative expenses
d.
Total variable manufacturing costs, total variable selling and administrative expenses, and desired profit
Bloom’s: Remembering
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Chapter 12
79. In using the variable cost concept of applying the cost-plus approach to product pricing, what is included in the
markup?
a.
Total variable manufacturing costs, total variable selling and administrative expenses, and desired profit
b.
Opportunity costs plus desired profit
c.
Total sunk costs plus desired profit
d.
Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit
80. The markup determined by management should be sufficient to earn:
a.
manufacturing cost plus the selling and administrative expenses.
b.
the desired profit plus cover any costs and expenses that are not included in the cost amount.
c.
only costs and expenses that are not included in the cost amount.
d.
only the desired profit.
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Chapter 12
81. What cost concept used in applying the cost-plus approach to product pricing includes only total manufacturing costs
in the “cost” amount to which the markup is added?
a.
Variable cost concept
b.
Total cost concept
c.
Product cost concept
d.
Opportunity cost concept
82. What cost concept used in applying the cost-plus approach to product pricing includes total manufacturing costs and
total selling and administrative expenses in the “cost” amount to which the markup is added?
a.
Variable cost concept
b.
Total cost concept
Multiple Choice
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c.
Product cost concept
d.
Opportunity cost concept
83. Managers who often make special pricing decisions are more likely to use which of the following cost concepts in
their work?
a.
Total cost
b.
Product cost
c.
Variable cost
d.
Fixed cost
Chapter 12
84. Defense contractors would be more likely to use which of the following cost concepts in pricing their product?
a.
Variable cost
b.
Product cost
c.
Total cost
d.
Fixed cost
85. In contrast to the total product and variable cost concepts used in setting selling prices, the target cost approach
assumes that:
a.
a markup is added to total cost.
b.
selling price is set by the market price.
c.
a markup is added to variable cost.
d.
a markup is added to product cost.
Chapter 12
86. Red Co. uses the product cost concept of applying the cost-plus approach to product pricing. Below is cost
information for the production and sale of 40,000 units of its sole product. Red Co. desires a profit equal to a 15% rate of
return on invested assets of $1,200,000.
Fixed factory overhead cost
$80,000.00
Fixed selling and administrative costs
140,000.00
Variable direct materials cost per unit
7.00
Variable direct labor cost per unit
11.00
Variable factory overhead cost per unit
3.00
Variable selling and administrative cost per unit
2.00
The dollar amount of desired profit from the production and sale of the company’s product is:
a.
$70,000.
b.
$60,000.
c.
$180,000.
d.
$140,000.
GO4W-NQNBEE
87. Red Co. uses the product cost concept of applying the cost-plus approach to product pricing. Below is cost
information for the production and sale of 40,000 units of its sole product. Red Co. desires a profit equal to a 15% rate of
return on invested assets of $1,200,000.
Fixed factory overhead cost
$80,000.00
Fixed selling and administrative costs
140,000.00
Variable direct materials cost per unit
7.00
Variable direct labor cost per unit
11.00
Variable factory overhead cost per unit
3.00
Variable selling and administrative cost per unit
2.00
GO4W-NQNBEE
Chapter 12
What is the markup percentage for the company’s product? (Round the answer to two decimal places.)
a.
30.30%
b.
43.50%
c.
40.00%
d.
35.60%
GO4W-NQNBEE
88. Red Co. uses the product cost concept of applying the cost-plus approach to product pricing. Given below is cost
information for the production and sale of 40,000 units of its sole product. Red Co. desires a profit equal to a 15% rate of
return on invested assets of $1,200,000.
Fixed factory overhead cost
$80,000.00
Fixed selling and administrative costs
140,000.00
Variable direct materials cost per unit
7.00
Variable direct labor cost per unit
11.00
Variable factory overhead cost per unit
3.00
Variable selling and administrative cost per unit
2.00
The unit selling price for the company’s product is:
a.
$28.
b.
$37.
c.
$42.
d.
$33.
Chapter 12
89. Soap Company manufactures Soap X and Soap Y and can sell all it can make of either. Hours available to produce the
products is the constrained resources.Based on the following data, which statement is true?
X
Y
Sales Price
$20
$25
Variable Cost
14
15
Hours needed to process
3
5
a.
X is more profitable than Y.
b.
Y is more profitable than X.
c.
Neither X nor Y have a positive contribution margin.
d.
X and Y are equally profitable.
Multiple Choice
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90. Soap Company manufactures Soap X and Soap Y and can sell all it can make of either. Hours available to produce the
products is the constrained resources. Based on the following data, if Soap could reduce the processing time for X by
10%, which of the following statements is true?
X
Y
Sales Price
$20
$25
Variable Cost
14
15
United States – AK – DISC: IMA: Decision Analysis
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Chapter 12
Hours needed to process
3
5
a.
It would take 162 minutes to process one unit of X.
b.
There would be no difference in the contribution margin per hour as compared to it before the processing time
reduction.
c.
The contribution margin per hour for X would be $2.
d.
Soap Y would still be the most profitable.
Multiple Choice
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Bloom’s: Applying
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91. What is a production constraint?
a.
The point in the manufacturing process where the demand for the company’s products exceeds its ability to
produce the products
b.
A manufacturing strategy used to reduce production cost by eliminating waste of inventory
c.
A manufacturing strategy that focuses on increasing the influence of constraints on production processes
d.
The point in the manufacturing process where total variable costs and total fixed costs equals total revenues
Multiple Choice
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Bloom’s: Remembering
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