FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 18: Pricing Decisions

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 71

Multiple Choice

Review LaterAdd Note

Review Later

Twisdale Corporation manufactures numerous products, one of which is called Omicron-52. The company has provided the following data about this product: Management is considering decreasing the price of Omicron-52 by 4%, from $42.00 to $40.32. The company's marketing managers estimate that this price reduction would increase unit sales by 5%, from 160,000 units to 168,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will product Omicron 52 earn at a price of $40.32 if this sales forecast is correct?

A) $2,131,200
B) $61,200
C) $167,760
D) $2,237,760

E) All of the above
F) C) and D)

Correct Answer

verified

Show Answer

Question 72

Multiple Choice

Review LaterAdd Note

Review Later

Twisdale Corporation manufactures numerous products, one of which is called Omicron-52. The company has provided the following data about this product: Assume that the total traceable fixed expense does not change. How many units of product Omicron-52 would Twisdale need to sell at a price of $40.32 to earn the same net operating income that it currently earns at a price of $42.00? (Round your answer up to the nearest whole number.)

A) 138,000
B) 155,405
C) 180,181
D) 168,000

E) A) and B)
F) A) and C)

Correct Answer

verified

Show Answer

Question 73

Multiple Choice

Review LaterAdd Note

Eastwood Corporation manufactures numerous products, one of which is called Beta96. The company has provided the following data about this product: Management is considering decreasing the price of Beta96 by 8%, from $88.00 to $80.96. 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 Beta96 earn at a price of $80.96 if this sales forecast is correct?

Diedrich Corporation makes a product with the following costs: The company uses the absorption costing approach to cost-plus pricing described in the text. The pricing calculations are based on budgeted production and sales of 67,000 units per year. The company has invested $420,000 in this product and expects a return on investment of 12%. Direct labor is a variable cost in this company. The markup on absorption cost is closest to:

Demand for a product is said to be elastic if a change in price has little effect on the number of units sold.

Chruch Corporation manufactures numerous products, one of which is called Tau-42. The company has provided the following data about this product: 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%.)

Bellini Robotics Corporation has developed a new robot-model EM-28-that has been designed to outperform a competitor's best-selling robot. The competitor's product has a useful life of 30,000 hours of service, has operating costs that average $1.40 per hour, and sells for $129,000. In contrast, model EM-28 has a useful life of 90,000 hours of service and its operating cost is $0.80 per hour. Bellini has not yet established a selling price for model EM-28. Required: From a value-based pricing standpoint: a. What is the reference value that Bellini should consider when pricing model EM-28? b. What is the differentiation value offered by model EM-28 relative to the competitor's offering for each 90,000 hours of service? c. What is model EM-28's economic value to the customer over its 90,000 hour useful life? d. What range of possible prices should Bellini consider when setting a price for model EM-28?

Paluso Corporation manufactures numerous products, one of which is called Alpha42. The company has provided the following data about this product: Management is considering increasing the price of Alpha42 by 4%, from $18.00 to $18.72. The company's marketing managers estimate that this price hike would decrease unit sales by 10%, from 180,000 units to 162,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will product Alpha-42 earn at a price of $18.72 if this sales forecast is correct?

Ritner Corporation manufactures a product that has the following costs: The company uses the absorption costing approach to cost-plus pricing as described in the text. The pricing calculations are based on budgeted production and sales of 29,000 units per year. The company has invested $360,000 in this product and expects a return on investment of 9%. Required: a. Compute the markup on absorption cost. b. Compute the selling price of the product using the absorption costing approach.

Kingsford Pure Water Solutions Corporation has developed a new water purification system-model PC-97-that has been designed to outperform a competitor's best-selling water purification system. Model PC-97 has a useful life of 100,000 hours of service and its operating cost is $0.70 per hour. In contrast, the competitor's product has a useful life of 20,000 hours of service and operating costs that average $1.00 per hour. The competitor's water purification system sells for $149,000. Kingsford has not yet established a selling price for model PC-97. Required: From a value-based pricing standpoint what range of possible prices should Kingsford consider when setting a price for model PC-97?

Trueba Electronics Corporation has developed a new testing instrument-model JJ-92-that has been designed to outperform a competitor's best-selling instrument. Model JJ-92 has a useful life of 100,000 hours of service and its operating cost is $0.50 per hour. In contrast, the competitor's product has a useful life of 20,000 hours of service and has operating costs that average $0.80 per hour. The competitor's instrument sells for $109,000. Trueba has not yet established a selling price for model JJ-92. Required: From a value-based pricing standpoint: a. What is the reference value that T.rueba should consider when pricing model JJ-92? b. What is the differentiation value offered by model JJ-92 relative to the competitor's offering for each 100,000 hours of service? c. What is model JJ-92's economic value to the customer over its 100,000 hour useful life? d. What range of possible prices should Trueba consider when setting a price for model JJ-92?

Under the absorption approach to cost-plus pricing described in the text, all fixed costs are included in the cost base in setting a selling price.

Schimpf Industries Inc. has developed a new grinder, model WC-13, that is designed to offer superior performance to a comparable grinder sold by Schimpf's main competitor. The competing grinder sells for $24,000 and needs to be replaced after 1,000 hours of use. It also requires $2,000 of preventive maintenance during its useful life. Model WC-13's performance capabilities are similar to the competing product with two important exceptions-it needs to be replaced only after 4,000 hours of use and it requires $5,000 of preventive maintenance during its useful life. From a value-based pricing standpoint what range of possible prices should Schimpf consider when setting a price for model WC-13?

Jaakola Corporation makes a product with the following costs: The company uses the absorption costing approach to cost-plus pricing described in the text. The pricing calculations are based on budgeted production and sales of 28,000 units per year. The company has invested $360,000 in this product and expects a return on investment of 15%. The markup on absorption cost would be closest to:

Spach Corporation manufactures numerous products, one of which is called Beta68. The company has provided the following data about this product: Management is considering decreasing the price of Beta68 by 5%, from$16.00 to $15.20. The company's marketing managers estimate that this price reduction would increase unit sales by 10%, from 110,000 units to 121,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will product Beta68 earn at a price of $15.20 if this sales forecast is correct?

Alway Candy Corporation is implementing a target costing approach for its latest new product, the "Big Glob" candy bar. The following information relates to the Big Glob: Based on this information, what is Alway's target selling price per bar for the Big Glob?

Whittenton Corporation manufactures numerous products, one of which is called Tau14. The company has provided the following data about this product: What is the net operating income for product Tau14 at the current price?

Reppond Corporation manufactures numerous products, one of which is called Gamma38. The company has provided the following data about this product: Assume that the total traceable fixed expense does not change. How many units of product Gamma38 would Reppond need to sell at a price of $94.05 to earn the same net operating income that it currently earns at a price of $99.00? (Round your answer up to the nearest whole number.)

Holding all other things constant, if the expected unit sales increase, then the markup under absorption costing will:

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. From a value-based pricing standpoint what is GZ-29's economic value to the customer over its 30,000 hour useful life?