Question :
21) Explain the difference between locked in costs and costs : 1211808
21) Explain the difference between locked in costs and costs incurred. Which of these types of costs does a traditional accounting system emphasize? At which stage of the value chain are most costs locked-in? At which stage of the value chain are most costs incurred? What implication does this have for good cost management?
Objective 13.5
1) The cost-plus pricing approach is generally in the form ________.
A) Cost base + Markup component = Prospective selling price
B) Prospective selling price – Cost base = Markup component
C) Cost base + Gross margin = Prospective selling price
D) Variable cost + Fixed cost + Contribution margin = Prospective selling price
2) In cost-plus pricing, the markup component ________.
A) is a rigid number
B) is ultimately determined by the market
C) provides a means to calculate the actual selling price
D) is the end rather than the start of pricing decisions
3) Which of the following can be used to determine markup percentage in the case of cost-plus pricing?
A) Target annual operating income / Invested capital
B) Estimated annual dividend / Invested capital
C) Target sales revenue / Target annual operating income
D) Estimated annual dividend / Target annual operating income
4) The markup percentage is most likely to be the lowest while using ________ as the cost base.
A) variable manufacturing cost
B) variable cost of the product
C) manufacturing cost
D) full cost of the product
5) Samuels Company is considering pricing its 10,000-gallon petroleum tanks using either variable manufacturing or full product costs as the base. The variable cost base provides a prospective price of $6,000 and the full cost base provides a prospective price of $6,100. The difference between the two prices is ________.
A) the estimated amount of profit
B) that the variable cost base estimates fixed costs in the markup percentage while the full cost base includes an amount for fixed costs
C) known as price discrimination
D) caused by the inability of most companies to estimate fixed cost per unit with any degree of reliability
6) Which of the following can be used to arrive at the target rate of return on investment?
A) dividing target annual operating income by invested capital
B) multiplying target annual operating income by the rate of fixed preference dividend
C) dividing invested capital by estimated dividend rate
D) multiplying earnings available to equity stakeholders by price-equity ratio
7) The amount of markup percentage is usually higher if ________.
A) there is idle capacity
B) demand is strong
C) competition is intense
D) demand is elastic
8) When making pricing decisions managers should include fixed cost per unit in the cost because ________.
A) it leads to reporting higher operating income for the period
B) it allows managers to report positive contribution as long as prices are above variable costs
C) in the long run, the price of a product must exceed the full cost of the product
D) it requires the management accountant to perform a detailed analysis of cost-behavior patterns to separate product costs into variable and fixed components
