Question 1

The cost of goods sold equals total manufacturing costs when there is not beginning or ending inventory of a product.

Accepted Answer

Cost of goods sold is calculated as the total cost of manufacturing a product, including direct materials, direct labor, and manufacturing overhead. However, if there is beginning or ending inventory, they must be taken into account when calculating the cost of goods sold. Therefore, the statement is true only when there is no inventory at the beginning or end of the accounting period.

Question 2

What is a key factor affecting pricing decisions when there is a decrease in competition?

Accepted Answer

The key factor is the customer's willingness to pay based on the value that consumers place on products or services.It is not the costs or the competitors.

Question 3

Companies operating in competitive markets must not accept the prices set by the market.

Accepted Answer

Companies operating in competitive markets must always accept the prices set by the market.They use the market-based approach to costing products and services.

Question 4

Which of the following is not true about pricing decisions?

Accepted Answer

The statement "Customers never have an influence on demand and supply" is not true as customers are one of the major influences on demand, which in turn affects supply, and ultimately pricing decisions.

Question 5

How can costs impact the supply and demand of products?

Accepted Answer

The answer of How can costs impact the supply and...

Question 6

To set long-run prices,managers calculate the ________ -cost of producing and selling a product.

Accepted Answer

Full-cost pricing takes into account all costs, including direct and indirect costs, such as labor, materials, overhead, and other expenses incurred in the production and distribution of a product. By calculating the full cost of producing and selling a product, managers can ensure that their prices cover all costs and allow for a reasonable profit margin in the long run. This approach is more comprehensive than partial or small-cost pricing, which only considers certain costs or variables. Strategic pricing may also be a factor in long-run prices, but it is not the main factor in determining the full cost of production and pricing a product.

Question 7

The lower the cost of producing a product,the lower the quantity of product the company is willing to supply.

Accepted Answer

The lower the cost of producing a product,the greater the quantity of product the company is willing to supply.

Question 8

Companies operating in competitive markets use the:

Accepted Answer

Companies in competitive markets use the market-based approach to pricing, which involves analyzing the prices offered by competitors and setting prices accordingly. This approach helps companies stay competitive and avoid pricing their products too high or too low.

Question 9

The managerial accountant at the Wright Company reported the following information:

Required:
Compute the Total quantity of cost driver of direct materials and direct manufacturing labor (DML).

Accepted Answer

A)Total Quantity of Cost Driver for Direct Materials [#3 × #4] =: [(1 × 175,000)] = 175,000
Total Quantity of Cost Driver for Direct Manufacturing Labor [#3 × #4] =: [(3.4 × 175,000)] =595,000

Question 10

Which of the following is not true about competitors?

Accepted Answer

It is important for managers to be aware of their competitors' technologies and advancements in order to stay competitive in their industry.

Question 11

Accounting managers that start pricing decisions by asking "Given what our customers want and how our competitors will react to what we do,what price should we charge" is most likely to use:

Accepted Answer

This approach starts with the market - considering customer desires and competitor reactions - which is characteristic of a market-based approach to pricing.

Question 12

The higher the price a monopolist sets,the higher the demand for the monopolist's product as customers seek substitute products or forgo buying the product.

Accepted Answer

The higher the price a monopolist sets,the lower the demand for the monopolist's product as customers seek substitute products or forgo buying the product.

Question 13

How can the competitor influence demand and supply of products and services?

Accepted Answer

The answer of How can the competitor influence demand and...

Question 14

Which of the following is true about costs?

Accepted Answer

As companies increase supply, they often experience economies of scale, leading to initially lower costs. However, after a certain point, diseconomies of scale can occur, causing costs to rise.

Question 15

The cost-based approach is also called:

Accepted Answer

The cost-based approach is often referred to as cost-plus pricing, indicating that the company determines the cost of producing a product or service and then adds a markup (or plus) to that cost to determine the selling price.

Question 16

Fluctuations in exchange rates between different countries' currencies never affect costs and pricing decisions.

Accepted Answer

Because competition spans international borders,fluctuations in exchange rates between different countries' currencies affect costs and pricing decisions.

Question 17

The strategic decision designed to build long-run relationships with customers based on stable and predictable prices is ________.

Accepted Answer

Long-run pricing is the strategic decision designed to build long-term relationships with customers based on stable and predictable prices, which can increase customer loyalty and retention. This approach focuses on the lifetime value of a customer rather than short-term gains. It also helps to eliminate the uncertainty of price fluctuations and build trust with customers who value consistency.

Question 18

Which of the following is not true about international competition?

Accepted Answer

Different countries' currencies can have a significant impact on pricing decisions for international competition by affecting costs and profits. Therefore, option E is not true.

Question 19

The Trust Manufacturing Company reported $50,000,000 in direct manufacturing costs for 140,000 units of product.Compute the manufacturing cost per unit.

Accepted Answer

A)[($50,000,000 / 140,000)] = $357.14 manufacturing cost per unit

Question 20

The Wright Company reported a 7% defect rate of bolts and there are 140,000 units of bolts.Compute the number of defects in units at the Wright Company.

Accepted Answer

C)[(.07% × 140,000)] = 9,800 defective units

Quiz 7: Pricing Decisions, customer Profitability, and Cost Management