Question 1.1. When companies do not want to use market prices or find it too costly, they typically use __________ prices, even though suboptimal decisions may occur.
average-cost
full-cost
long-run cost
short-run average cost
Question 2.2. The price of movie tickets for opening day and the few days following compared to the price six months later is an example of
price gouging.
peak-load pricing.
dumping.
demand elasticity.
Question 3.3. The amount of markup percentage is usually higher if
demand is elastic.
competition is intense.
there is idle capacity.
demand is strong.
Question 4.4. An understanding of life-cycle costs can lead to
additional costs during the manufacturing cycle
less need for evaluation of the competition
cost-effective product designs that are easier to service
mutually beneficial relationships between buyers and sellers.
Question 5.5. Each month, Haddon Company has $275,000 total manufacturing costs (20% fixed) and $125,000 distribution and marketing costs (36% fixed). Haddon's monthly sales are $500,000.
The markup percentage on full cost to arrive at the target (existing) selling price is
25%
75%
80%
20%
Question 6.6. A product may be passed from one subunit to another subunit in the same organization. The product is known as
an interdepartmental product.
an intermediate product.
a subunit product.
a transfer product.
Question 7.7. Transfer prices should be judged by whether they promote
goal congruence.
the balanced scorecard method
a high level of subunit autonomy in decision making
Both 1 and 3 are correct
Question 8.8. A benefit of using a market-based transfer price is the
profits of the transferring division are sacrificed for the overall good of the corporation
profits of the division receiving the products are sacrificed for the overall good of the corporation
economic viability and profitability of each division can be evaluated individually
None of the above
Question 9.9. The range over which two divisions will negotiate a transfer price is
between the supplying division's variable cost and the market price of the product
between the supplying division's variable cost and its full cost of the product
anywhere above the supplying division's full cost of the product
between the supplying division's full cost and 180% above its full cost
Question 10.10. Division A sells soybean paste internally to Division B, which in turn, produces soybean burgers that sell for $5 per pound. Division A incurs costs of $0.75 per pound while Division B incurs additional costs of $2.50 per pound. Which of the following formulas correctly reflects the company's operating income per pound?
$5.00 - ($1.25 + $2.50) = $1.25
$5.00 - ($0.75 + $2.50) = $1.75
$5.00 - ($0.75 + $3.75) = $0.50
$5.00 - ($0.25 + $1.25 + $3.50) = 0