Question : Objective 13.3 1) Which of the following true of target pricing? A) : 1211822

Objective 13.3

1) Which of the following is true of target pricing?

A) It is used for short-term pricing decisions.

B) It is one form of cost-based pricing.

C) Its estimates are based on customers’ perceived value of the product.

D) It is calculated by adding a markup component to the cost base.

2) Which of the following is true of reverse engineering?

A) It is the process of building a new product by first determining the selling price of the product.

B) It is the process by which a company analyzes its own process to reduce cost.

C) It is the process by which a company markets a product by analyzing competitors marketing strategy.

D) It is the process by which the competitor’s products are disassembled and analyzed.

3) The department usually in the best position to identify customers’ needs is the ________.

A) production department

B) sales and marketing department

C) design department

D) distribution department

4) Relevant costs for target pricing are ________.

A) variable manufacturing costs

B) variable manufacturing and variable nonmanufacturing costs

C) all fixed costs

D) all future costs, both variable and fixed

5) Place the following steps for the implementation of target costing in order:

A = Derive a target cost

B = Develop a target price

C = Perform value engineering

D = Determine target operating income

A) B D A C

B) B A D C

C) A D B C

D) A B C D

6) Which of the following is an objective of value engineering?

A) to reduce cost by eliminating all value-added activities

B) to streamline and add non-value added activities

C) to reduce the total cost of the product

D) to understand competitors’ product design

7) Managers need to understand customers because ________.

A) they are the key in influencing the board decisions and help in formulating policies with the suppliers

B) they guide the managers to formulate pricing policies

C) they are more knowledgeable as they easy access to price and other information online

D) they influence the costing decisions of the product

8) ________ identifies an estimated price customers are willing to pay and then computes the cost to be achieved to earn the desired profit.

A) Cost-plus pricing

B) Target costing

C) Kaizen costing

D) Peak-load costing

9) Which of the following is true of target costing?

A) In target costing, all future costs are considered for long-run pricing.

B) In target costing, cost is the starting point for determining the price of the product.

C) In target costing, input from suppliers and distributors are not relevant.

D) In target costing, a key goal is to minimize value added activities of a product.

10) In relation to target costing, which of the following best describes target cost per unit?

A) It is the targeted cost of producing one unit to achieve the current year’s budgeted profit.

B) It is the estimated long-run cost  of a product that enables the company to achieve its target operating income.

C) It is the cost that can be achieved by ensuring that the company produced its products at maximum efficiency.

D) It is the budgeted cost that the company estimates in producing a unit in the current budget period.