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Exam 9: Pricing

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Question 1

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The last step in determining the material loading charge percentage is to

A) estimate annual costs for purchasing, receiving, and storing materials.
B) estimate the total cost of parts and materials.
C) divide material charges by the total estimated costs of parts and materials.
D) add a desired profit margin on the materials themselves.

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Question 2

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Under the variable cost-plus approach, the cost base consists of all of the variable costs associated with a product except variable selling and administrative costs.

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Question 3

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The first step for time and material pricing is to calculate the material loading charge.

Maggie Co.has variable manufacturing costs per unit of $20, and fixed manufacturing cost per unit is $15.Variable selling and administrative costs per unit are $4, while fixed selling and administrative costs per unit $6.Maggie desires an ROI of $7.50 per unit.If Maggie Co.uses the absorption cost approach, what is its mark-up percentage?

The first step in the absorption cost approach is to calculate the mark-up percentage used in setting the target selling price.

Under the absorption cost approach, all of the following are included in the cost base except

The transfer price approach that is often considered the best approach because it generally provides the proper economic incentives is the

Factors that can affect pricing decisions include all of the following except

If a cost-based transfer price is used, the transfer price must be based on variable cost.

Use the following information to answer questions Division A produces a product that it sells to the outside market.It has compiled the following: -Division B of the same company is currently buying an identical product from an outside provider for $38 per unit.It wishes to purchase 5,000 units per year from Division A.Division A is currently selling 30,000 units of the product per year.If the internal transfer is made, Division A will not incur any selling costs.What would be the minimum transfer price per unit that Division A would be willing to accept?

Use the following information for questions The following data are available for Wheels 'N Spokes Repair Shop for 2012: The desired profit margin is $15 per labour hour.The material loading charge is 35% of invoice cost.It is estimated that 4,000 labour hours will be worked in 2012. -In March 2012, Wheels 'N Spokes repairs a bicycle that takes three hours to repair and uses parts of $70.The bill for this repair would be

Cuff budgets sales of its truck tires at $160 per tire and estimates that 10,000 tires can be sold during the coming year.Variable costs per tire are $60 and Cuff desires a profit of $30 per tire.The target cost per tire is

In a competitive market, a company is forced to act as a price taker and must emphasize minimizing and controlling costs.

The transfer price approach that conceptually should work the best is the

The first step in the absorption cost approach is to calculate the

The reasons for using the variable cost-plus approach include all of the following except this approach

When a cost-based transfer price is used, the transfer price may be based on any of the following except

Using the negotiated transfer pricing approach, a minimum transfer price is established by the selling division.

In most cases, prices are set by the

Why is transfer pricing important?