Q: A company is considering a cost-plus pricing method. If the variable manufacturing cost per unit is $$400, fixed costs per unit are 100$$, and the desired markup is 20%, what is the selling price per unit?

$$\500$$ \times 1.20 = \$$600$$

Q: If a company wants to achieve a target return on investment (ROI) of 15% and has invested capital of $115,200,000, what is the target annual operating income?

$$115,200,000 \times 0.15 = \17$$,280,000$

Question 1

Which of the following is NOT a major influence on pricing decisions according to the study materials?

Accepted Answer

Government regulations

Question 2

Astel is considering a one-time special order to supply 5,000 computers. The relevant cost per computer is calculated as follows: direct materials $$460, direct manufacturing labor 64$$, and fixed costs for additional capacity $250,000. What is the relevant cost per computer?

Accepted Answer

$574

Question 3

Which pricing strategy is based on the estimated price that customers are willing to pay, and then derives the target cost to achieve desired profitability?

Accepted Answer

Target pricing

Question 4

If Astel bids $$610 per computer for a special order and the relevant cost per computer is 574$$, what is the expected increase in operating income from winning the bid for 5,000 computers?

Accepted Answer

$180,000

Question 5

Which of the following best describes the concept of 'locked-in costs'?

Accepted Answer

Costs determined early in the design process that cannot be avoided later

Question 6

A company uses cost-plus pricing with a cost base of $720 and a markup of 12%. What is the prospective selling price?

Accepted Answer

$806.40

Question 7

Which of the following is a key advantage of stable pricing for a company?

Accepted Answer

It improves planning and fosters long-term buyer-seller relationships

Question 8

In life-cycle costing, which of the following costs would NOT typically be included?

Accepted Answer

Interest expense on company loans

Question 9

Which formula correctly calculates the target operating income per unit if total target operating income is $16,000,000 and the company plans to sell 200,000 units?

Accepted Answer

$$\frac{16,000,000}{200,000}$$

Question 10

Which of the following is a potential risk of mismanaging value engineering and target costing?

Accepted Answer

Decreased product quality and missed market opportunities

Question 11

A company is considering a cost-plus pricing method. If the variable manufacturing cost per unit is $$400, fixed costs per unit are 100$$, and the desired markup is 20%, what is the selling price per unit?

Accepted Answer

$$\500$$ 	imes 1.20 = \$$600$$

Question 12

Which pricing strategy is most appropriate for commodity products where prices are set by the market?

Accepted Answer

Market-based pricing

Question 13

What is the main purpose of life-cycle budgeting?

Accepted Answer

To estimate and manage all product costs across the entire value chain

Question 14

Which of the following is an example of a qualitative factor that should be considered in pricing decisions?

Accepted Answer

Customer perceptions of product value

Question 15

If a company wants to achieve a target return on investment (ROI) of 15% and has invested capital of $115,200,000, what is the target annual operating income?

Accepted Answer

$$115,200,000 	imes 0.15 = \17$$,280,000$

Question 16

Which of the following is a legal pricing practice under the Canadian Competition Act?

Accepted Answer

Peak-load pricing

Question 17

Astel plans to sell 200,000 units of a redesigned product at a target profitability of $$16 million. If the current total cost per unit is 638$$, what is the minimum selling price per unit to achieve the target profit?

Accepted Answer

$$\frac{127,690,000 + 16,000,000}{200,000}$$

Question 18

Which of the following is a benefit of product life-cycle reporting?

Accepted Answer

It makes all costs and revenues visible for each product over its entire life span

Question 19

Which of the following is a proactive environmental strategy that can improve both sustainability and profitability?

Accepted Answer

Designing products to prevent and reduce pollution at the design stage

Question 20

Which of the following statements about cost-plus pricing and target pricing is correct?

Accepted Answer

Cost-plus pricing sets prices based on costs plus a markup, while target pricing starts with the market price and works backward to achieve desired profit

Pricing Decisions and Cost Management in Financial Accounting

Study Guide - Practice Questions

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