29) A full-cost formula for pricing does not require the management accountant to perform a detailed analysis of cost-behavior patterns.
30) Nancy Company has budgeted sales of $300,000 with the following budgeted costs:
Direct materials$60,000
Direct manufacturing labor40,000
Factory overhead
Variable30,000
Fixed50,000
Selling and administrative expenses
Variable20,000
Fixed30,000
Compute the average markup percentage for setting prices as a percentage of:
a.The full cost of the product
b.The variable cost of the product
c.Variable manufacturing costs
d.Total manufacturing costs
31) Timothy Company has budgeted sales of $780,000 with the following budgeted costs:
Direct materials$168,000
Direct manufacturing labor132,000
Factory overhead
Variable96,000
Fixed108,000
Selling and administrative expenses
Variable72,000
Fixed100,000
Compute the average markup percentage for setting prices as a percentage of:
a.Total manufacturing costs
b.The variable cost of the product
c.The full cost of the product
d.Variable manufacturing costs
Objective 13.6
1) Life-cycle costing is the name given to ________.
A) a method of cost planning to reduce manufacturing costs to targeted levels
B) the process of examining each component of a product to determine whether its cost can be reduced
C) the process of managing all costs along the value chain
D) a system that focuses on reducing costs during the manufacturing cycle
2) An understanding of life-cycle costs can lead to ________.
A) additional costs during the manufacturing cycle
B) less need for evaluation of the competition
C) cost effective product designs that are easier to service
D) mutually beneficial relationships between buyers and sellers
3) Life-cycle budgeting is particularly important when ________.
A) the development period for R&D is short and inexpensive
B) there are significant nonproduction costs
C) most costs are locked in during production
D) a low percentage of costs are incurred before any revenues are received
4) Life-cycle budgeting and life-cycle costing help highlight ________.
A) an increase in customer-service costs due to using inferior materials
B) high production costs caused by a complex design
C) large ordering costs due to the great number of component parts used
D) an increase in annual operating income resulting from the new product
5) Life-cycle budgeting ________.
A) has little in common with target pricing.
B) is most useful to companies that manufacture small items such as household plastics.
C) helps companies estimate revenues over a multiyear horizon.
D) gives companies more insight into total costs when manufacturing costs consume the majority of the resources.
6) Customer life-cycle costs are the ________.
A) costs incurred by the selling company to satisfy the customer.
B) refer to the costs to the customers for buying and using a product.
C) same as the selling life-cycle prices.
D) replacement costs of using a product or service.
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