90) Kinsley Corporation manufactures numerous products, one of which is called Kappa03. The
company has provided the following data about this product:
Unit sales (a)
50,000
Selling price per unit
$
36.00
Variable cost per unit
$
26.00
Traceable fixed expense
$
470,000
–
Assume that the total traceable fixed expense does not change. If Kinsley increases the price of
Kappa03 to $38.52, what percentage change in unit sales would provide the same net operating
income as is currently being earned at a price of $36.00? (Your answer should be rounded to the
nearest 0.1%.)
A) -6.0%
B) -24.9%
C) -10.0%
D) -20.1%
91) Pascal Corporation manufactures numerous products, one of which is called Gamma66. The
company has provided the following data about this product:
Unit sales (a)
100,000
Selling price per unit
$
51.00
Variable cost per unit
34.00
Contribution margin per unit (b)
$
17.00
Total contribution margin (a) x (b)
$
1,700,000
Traceable fixed expense
1,570,000
Net operating income
$
130,000
–
Management is considering decreasing the price of Gamma66 by 4%, from $51.00 to $48.96.
The company’s marketing managers estimate that this price reduction would increase unit sales
by 10%, from 100,000 units to 110,000 units. Assuming that the total traceable fixed expense
does not change, what net operating income will product Gamma66 earn at a price of $48.96 if
this sales forecast is correct?
A) $(74,000)
B) $1,645,600
C) $75,600
D) $1,496,000
92) Pascal Corporation manufactures numerous products, one of which is called Gamma-66. The
company has provided the following data about this product:
Unit sales (a)
100,000
Selling price per unit
$
51.00
Variable cost per unit
34.00
Contribution margin per unit (b)
$
17.00
Total contribution margin (a) × (b)
$
1,700,000
Traceable fixed expense
1,570,000
Net operating income
$
130,000
–
Assume that the total traceable fixed expense does not change. If Pascal decreases the price of
Gamma-66 to $48.96, what percentage change in unit sales would provide the same net operating
income as is currently being earned at a price of $51.00? (Your answer should be rounded to the
nearest 0.1%.)
A) 4.9%
B) (10.0)%
C) 13.6%
D) (7.6)%
93) Herrell Corporation manufactures numerous products, one of which is called Delta11. The
company has provided the following data about this product:
Unit sales (a)
110,000
Selling price per unit
$
29.00
Variable cost per unit
19.00
Contribution margin per unit (b)
$
10.00
Total contribution margin (a) × (b)
$
1,100,000
Traceable fixed expense
1,010,000
Net operating income
$
90,000
–
Management is considering increasing the price of Delta11 by 5%, from $29.00 to $30.45. The
company’s marketing managers estimate that this price hike would decrease unit sales by 10%,
from 110,000 units to 99,000 units. Assuming that the total traceable fixed expense does not
change, what net operating income will product Delta11 earn at a price of $30.45 if this sales
forecast is correct?
A) $1,133,550
B) $123,550
C) $249,500
D) $1,259,500
94) Herrell Corporation manufactures numerous products, one of which is called Delta-11. The
company has provided the following data about this product:
Unit sales (a)
110,000
Selling price per unit
$
29.00
Variable cost per unit
19.00
Contribution margin per unit (b)
$
10.00
Total contribution margin (a) × (b)
$
1,100,000
Traceable fixed expense
1,010,000
Net operating income
$
90,000
–
Assume that the total traceable fixed expense does not change. If Herrell increases the price of
Delta-11 to $30.45, what percentage change in unit sales would provide the same net operating
income as is currently being earned at a price of $29.00? (Your answer should be rounded to the
nearest 0.1%.)
A) (10.0)%
B) (8.2)%
C) (12.7)%
D) (19.8)%
95) Chruch Corporation manufactures numerous products, one of which is called Tau42. The
company has provided the following data about this product:
Unit sales (a)
Selling price per unit
$
Variable cost per unit
$
Traceable fixed expense
$
–
What is the net operating income for product Tau42 at the current price?
A) $3,840,000
B) $2,720,000
C) $80,000
D) $1,200,000
Unit sales (a)
60,000
Selling price per unit
$
64.00
Variable cost per unit
44.00
Contribution margin per unit (b)
$
20.00
Traceable fixed expense
1,120,000
Net operating income
$
80,000
–
96) Chruch Corporation manufactures numerous products, one of which is called Tau-42. The
company has provided the following data about this product:
Unit sales (a)
Selling price per unit
$
Variable cost per unit
$
Traceable fixed expense
$
–
Management is considering decreasing the price of Tau-42 by 6%, from $64.00 to $60.16. The
company’s marketing managers estimate that this price reduction would increase unit sales by
10%, from 60,000 units to 66,000 units. Assuming that the total traceable fixed expense does not
change, what net operating income will product Tau-42 earn at a price of $60.16 if this sales
forecast is correct?
A) $(53,440)
B) $969,600
C) $(150,400)
D) $1,066,560
97) Chruch Corporation manufactures numerous products, one of which is called Tau-42. The
company has provided the following data about this product:
Unit sales (a)
Selling price per unit
$
Variable cost per unit
$
Traceable fixed expense
$
–
Assume that the total traceable fixed expense does not change. If Chruch decreases the price of
Tau-42 to $60.16, what percentage change in unit sales would provide the same net operating
income as is currently being earned at a price of $64.00? (Your answer should be rounded to the
nearest 0.1%.)
A) 15.5%
B) 23.8%
C) (6.7)%
D) (10.0)%
Blauvelt Electronics Corporation has developed a new instrument—model GZ-29—that has been
designed to outperform a competitor’s best-selling instrument. Model GZ-29 has a useful life of
30,000 hours of service and its operating cost is $3.20 per hour.In contrast, the competitor’s
product has a useful life of 10,000 hours of service and has operating costs that average $5.60
per hour. The competitor’s instrument sells for $149,000. Blauvelt has not yet established a
selling price for model GZ-29.
98) From a value-based pricing standpoint, what is the reference value that Blauvelt should
consider when pricing model GZ-29?
A) $205,000
B) $149,000
C) $245,000
D) $447,000
99) From a value-based pricing standpoint, what is the differentiation value offered by GZ-29
relative to the competitor’s offering for each 30,000 hours of service?
A) $245,000
B) $205,000
C) $72,000
D) $370,000
100) From a value-based pricing standpoint, what is GZ-29’s economic value to the customer
over its 30,000 hour useful life?
A) $519,000
B) $370,000
C) $205,000
D) $245,000
101) From a value-based pricing standpoint, what range of possible prices should Blauvelt
consider when setting a price for GZ-29?
A) $245,000 ≤ Value–based price ≤ $370,000
B) $370,000 ≤ Value–based price ≤ $519,000
C) $149,000 ≤ Value–based price ≤ $519,000
D) $149,000 ≤ Value–based price ≤ $245,000
102) Wermers Industries Inc. has developed a new drill press, model LS-88, that is designed to
offer superior performance to a comparable drill press sold by Wermers’s main competitor. The
competing drill press sells for $31,000 and needs to be replaced after 1,000 hours of use. It also
requires $6,000 of preventive maintenance during its useful life. ModelLS-88’s performance
capabilities are similar to the competing product with two important exceptions—it needs to be
replaced only after 2,000 hours of use and it requires $7,000 of preventive maintenance during
its useful life.
From a value-based pricing standpoint, what is model LS-88’s economic value to the customer
over its 2,000 hour life?
A) $62,000
B) $36,000
C) $67,000
D) $43,000
103) Wermers Industries Inc. has developed a new drill press, model LS-88, that is designed to
offer superior performance to a comparable drill press sold by Wermers’s main competitor. The
competing drill press sells for $31,000 and needs to be replaced after 1,000 hours of use. It also
requires $6,000 of preventive maintenance during its useful life. ModelLS-88’s performance
capabilities are similar to the competing product with two important exceptions—it needs to be
replaced only after 2,000 hours of use and it requires $7,000 of preventive maintenance during
its useful life.
From a value-based pricing standpoint, what range of possible prices should Wermers consider
when setting a price for model LS-88?
A) $36,000 ≤ Value–based price ≤ $62,000
B) $31,000 ≤ Value–based price ≤ $62,000
C) $31,000 ≤ Value–based price ≤ $67,000
D) $36,000 ≤ Value–based price ≤ $67,000
104) Tavis Robotics Corporation has developed a new robot—model FI-73—that has been
designed to out perform a competitor’s best-selling robot. The competitor’s product has a useful
life of 10,000 hours of service, has operating costs that average $4.60 per hour, and sells for
$109,000. In contrast, model FI-73 has a useful life of 30,000 hours of service and its operating
cost is $2.60 per hour. Tavis has not yet established a selling price for model FI-73.
From a value-based pricing standpoint, what is the reference value that Tavis should consider
when pricing model FI-73?
A) $155,000
B) $109,000
C) $187,000
D) $327,000
105) Tavis Robotics Corporation has developed a new robot—model FI-73—that has been
designed to outperform a competitor’s best-selling robot. The competitor’s product has a useful
life of 10,000 hours of service, has operating costs that average $4.60 per hour, and sells for
$109,000. In contrast, model FI-73 has a useful life of 30,000 hours of service and its operating
cost is $2.60 per hour. Tavis has not yet established a selling price for model FI-73.
From a value-based pricing standpoint, what is the differentiation value offered by FI-73 relative
to the competitor’s offering for each 30,000 hours of service?
A) $60,000
B) $187,000
C) $278,000
D) $155,000
106) Tavis Robotics Corporation has developed a new robot—model FI-73—that has been
designed to out perform a competitor’s best-selling robot. The competitor’s product has a useful
life of 10,000 hours of service, has operating costs that average $4.60 per hour, and sells for
$109,000. In contrast, model FI-73 has a useful life of 30,000 hours of service and its operating
cost is $2.60 per hour. Tavis has not yet established a selling price for model FI-73.
From a value-based pricing standpoint, what is FI-73’s economic value to the customer over its
30,000 hour useful life?
A) $155,000
B) $278,000
C) $387,000
D) $187,000
107) Tavis Robotics Corporation has developed a new robot—model FI-73—that has been
designed to outperform a competitor’s best-selling robot. The competitor’s product has a useful
life of 10,000 hours of service, has operating costs that average $4.60 per hour, and sells for
$109,000. In contrast, model FI-73 has a useful life of 30,000 hours of service and its operating
cost is $2.60 per hour. Tavis has not yet established a selling price for model FI-73.
From a value-based pricing standpoint, what range of possible prices should Tavis consider when
setting a price for FI-73?
A) $187,000 ≤ Value–based price ≤ $278,000
B) $109,000 ≤ Value–based price ≤ $187,000
C) $109,000 ≤ Value–based price ≤ $387,000
D) $278,000 ≤ Value-based price ≤ $387,000