Acct Ch 8

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Author:
kppatel702
ID:
12624
Filename:
Acct Ch 8
Updated:
2010-03-31 05:32:00
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Managerial Accounting
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Exam II
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  1. Which of the following are relevant for a special order?

    A. Total company income before the order
    B. Incremental revenues and expenses
    C. Fixed manufacturing overhead
    D. Fixed costs
    B. Incremental revenues and expenses
    (this multiple choice question has been scrambled)
  2. Cost plus pricing

    A. Leads to profit maximization
    B. Is inherently circular for manufacturing firms
    C. Is difficult to perform
    D. None of the above are correct
    B. Is inherently circular for manufacturing firms
    (this multiple choice question has been scrambled)
  3. Target costing

    A. Leads to profit maximization
    B. Is used primarily with products that are already in production
    C. Adds desired profit to existing costs
    D. Requires specification of desired level of profit
    D. Requires specification of desired level of profit
    (this multiple choice question has been scrambled)
  4. Customer profitability is measured as

    A. Revenues - cost of goods sold
    B. Revenues - cost of goods sold - indirect manufacturing costs
    C. Revenues - indirect manufacturing costs
    D. Revenues - cost of goods sold - indirect service costs
    D. Revenues - cost of goods sold - indirect service costs
    (this multiple choice question has been scrambled)
  5. With activity based pricing

    A. Customers face a menu of prices for various services
    B. Customers are encouraged to consider the costs they impose on a supplier
    C. Customers may be charged less if they request less product variety in their orders
    D. All of the above are correct
    D. All of the above are correct
  6. To determine the profit maximizing price, a manager must

    A. Estimate the quantity demanded for various prices
    B. Estimate variable costs
    C. Both a and b are correct
    D. None of the above are correct
    C. Both a and b are correct
    (this multiple choice question has been scrambled)
  7. Typically, which departments are involved in setting target costs?

    A. Engineering
    B. Marketing
    C. Cost accounting
    D. All of the above
    D. All of the above
  8. Which of the following is an advantage of cost plus pricing?

    A. The cost plus pricing method is inherently circular
    B. The selection of a markup percentage is easily done
    C. The method is simple to apply
    D. All of the above are advantages to the cost plus pricing method
    C. The method is simple to apply
    (this multiple choice question has been scrambled)
  9. When is it beneficial for companies to accept an order that is priced at less than the products full cost?

    A. When incremental revenue exceeds more incremental cost
    B. It is never beneficial to accept an order that is priced below full cost
    C. It is always advantageous to have higher sales
    D. When the company is operating at capacity
    A. When incremental revenue exceeds more incremental cost
    (this multiple choice question has been scrambled)
  10. "Cost plus" pricing includes which of the following costs?

    A. Administrative costs
    B. Selling costs
    C. Manufacturing costs
    D. All of the above costs are included in cost plus pricing
    C. Manufacturing costs
    (this multiple choice question has been scrambled)
  11. Formula: Profit maximizing price
    Profit = ((Price per unit – variable cost per unit) x Quantity Demanded) – Fixed Cost
  12. Formula: Target costing
    Price - Desired Profit
  13. Customer profitability
    Revenues - cost of goods sold - indirect service costs
  14. According to economic theory, how would a manager determine the profit maximizing price for a product or service?
    The manager would estimate the quantity that could be sold at various prices.
  15. Why is cost plus pricing inherently circular for a manufacturing firm?
    The cost plus price is based on full cost per unit. But to determine full cost per unit you have to estimate the quantity that can be sold but the quantity sold depends on price
  16. To implement target costing for a new product, companies often set up a cross functional team with members from engineering, marketing, and cost accounting. Why is a cross functional team desirable when implementing the target costing approach?
    The target cost depends on price, and marketing staff is needed to determine product features and price. Engineers are needed to determine efficient production methods given the product features. And cost accountants are needed to estimate costs given the production process. A cross functional team helps ensure good communication among these various parties, increasing the likelihood that a product will be put into production that can be produced for the target cost.
  17. How is cost allocation used in customer profitability analysis?
    In customer profitability analysis, indirect costs are grouped into cost pools (e.g., the cost pool related to processing fax orders, the cost pool related to processing Internet orders, the cost pool related to shipping, etc.). The costs are then allocated to customers using various cost drivers (allocation bases) to determine customer profitability.
  18. Explain why less profitable customers may become more profitable if a supplier switches to activity based pricing?
    With activity-based pricing, customers are charged for various services. For example, there might be separate charges for delivery, for rush orders, and for returns. This way, customers that impose high costs on a supplier will pay for the services they demand.
  19. What is the lowest per unit price on a special order that a company could accept and still not show a loss from the special order?
    The lowest special order price should be the incremental cost of the order including opportunity cost

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