Question : 21.A pricing strategy that sets the price at a premium : 1257110

 

 

21.A pricing strategy that sets the price at a premium under the assumption that people will pay more for the product because of the product’s brand name, media attention, or some other reason that has piqued the interest of the public is known as:   

A. cost-plus pricing.

 

B. contribution margin-based pricing.

 

C. target pricing.

 

D. prestige pricing.

 

 

22.Chester Company plans to introduce a new product. A market research specialist claims that 20,000 units can be sold at a $100 selling price. Assuming the company desires a profit margin of 22% of sales, what is the target cost per unit?   

A. $128.21

 

B. $78

 

C. $80

 

D. $20

 

 

23.A market research specialist told Peachtree Company that it could expect to sell 500,000 units of its new high-capacity computer disk at a price of $5. Assuming the company desires a profit margin equal to 20% of sales, what target cost per unit is necessary?   

A. $1.00

 

B. $4.00

 

C. $3.00

 

D. None of these

 

 

24.Acme Company has variable costs equal to 30% of sales. The company is considering a proposal that will increase sales by $10,000 and total fixed costs by $7,000. By what amount will net income increase?   

A. $0

 

B. $3,000

 

C. $7,000

 

D. $4,000

 

 

25.Which of the following is not an assumption made when performing cost-volume-profit analysis?   

A. Number of units produced is greater than the number of units sold.

 

B. Worker efficiency is held constant.

 

C. The company produces within the relevant range of activity.

 

D. There is a linear relationship between cost and volume for both fixed and variable cost.

 

 

26.How does the cost-volume-profit model accommodate non-linear costs and revenues?   

A. Non-linear costs and revenues are ignored by the model.

 

B. Output volume is segregated into distinct ranges within which a linear relationship is expected to approximate the actual cost or revenue behavior.

 

C. It is not a problem since non-linear costs and revenues do not exist in practice.

 

D. None of these is correct.

 

 

27.Which of the following is not one of the assumptions underlying cost-volume-profit analysis?   

A. Costs are non-linear.

 

B. Production equals sales.

 

C. All costs can be segregated into fixed and variable components.

 

D. Revenues are linear.

 

 

28.Markham Company has a contribution margin ratio of 25%. The company is considering a proposal that will increase sales by $150,000. What increase in profit can be expected assuming total fixed costs increase by $25,000? (Do not round your intermediate calculations.)   

A. $6,250

 

B. $31,250

 

C. $37,500

 

D. $12,500

 

 

29.Billings Company has developed the following budgeted income statement:  The Company is experimenting with new engineering techniques and believes it can reduce variable cost to $4.50 per unit and significantly improve the product. The innovations would double fixed costs but the company expects to be able to increase sales to 3,500 units. If this strategy is pursued the company’s budgeted net income will   

A. decrease by $4,250.

 

B. increase by $4,850.

 

C. increase by $13,250.

 

D. decrease by $4,150.

 

 

30.A product has a contribution margin of $2.50 per unit and a selling price of $25 per unit. Fixed costs are $20,000. Assuming new technology increases the unit contribution margin by 50 percent but increases total fixed costs by $13,750, what is the new breakeven point in units?   

A. 3,667 units

 

B. 3,333 units

 

C. 13,500 units

 

D. 9,000 units

 

 

 

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