Question :
3) Which of the following true of long-run pricing?
A) It : 1211818
3) Which of the following is true of long-run pricing?
A) It is fixed at a level that recovers the variable cost of the company and a pre-determined profit markup.
B) It is generally a function of the market factors and the cost involved in production is generally not a consideration.
C) It is a strategic decision designed to build long-run relationships with customers based on stable and predictable prices.
D) It is based only on internal requirements like cost and estimated rate of return as in the long run these requirements are the driving factors of any organization.
4) For long-run pricing decisions, using stable prices has the advantage of ________.
A) minimizing the need to monitor competitor’s prices frequently
B) reducing the need to change cost structures frequently
C) reducing competition
D) helping to build buyer-seller relationships
5) Purple Trees manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $240 per table, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Purple Trees’ policy to add a 75% markup to full costs.
A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style. Purple Trees is invited to submit a bid to the hotel chain. What per unit price will Purple Trees most likely bid on this long-term order?
A) $168 per unit
B) $180 per unit
C) $252 per unit
D) $420 per unit
6) Zolas’ Heaters is approached by Ms. Leila, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Zolas’ Heaters has excess capacity. The following per unit data apply for sales to regular customers:
Direct materials$400
Direct manufacturing labor120
Variable manufacturing support60
Fixed manufacturing support200
Total manufacturing costs780
Markup (20% of total manufacturing costs)156
Estimated selling price$936
If Ms. Leila wanted a long-term commitment, and not a one-time-special order, for supplying this product, calculate the most likely price to be quoted assuming the markup remains same?
A) $780
B) $580
C) $520
D) $936
7) Golden Generator Supply is approached by Mr. Stephen, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Golden Generator Supply has excess capacity. The following per unit data apply for sales to regular customers:
Direct materials$1,700.00
Direct manufacturing labor100.00
Variable manufacturing support200.00
Fixed manufacturing support150.00
Total manufacturing costs2,150.00
Markup (30% of total manufacturing costs)645.00
Estimated selling price$2,795.00
If Mr. Stephen wanted a long-term commitment, and not a one-time-only special order, for supplying this product, calculate the most likely price to be quoted assuming the markup remains same?
A) $2,000
B) $2,150
C) $2,795
D) $2,800
8) Gracius Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Gracius Manufacturing has a policy of adding a 10% markup to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers:
Variable costs:
Direct materials$30
Direct labor10
Manufacturing overhead20
Marketing costs10
Fixed costs:
Manufacturing overhead100
Marketing costs20
Total costs190
Markup (10% of total costs)19
Estimated selling price$209
If the European customer wanted a long-term commitment, and not a one-time-only special order, for supplying this product, calculate the most likely price to be quoted assuming the markup remains same?
A) $70.00
B) $190.00
C) $209.00
D) $239.00
9) Grounded Coffee Products manufactures coffee tables. Grounded Coffee Products has a policy of adding a 20% markup to full costs and currently has excess capacity. The following information pertains to the company’s normal operations per month:
Output units20,000tables
Machine-hours8,000hours
Direct manufacturing labor-hours10,000hours
Direct materials per unit$105
Direct manufacturing labor per hour$10
Variable manufacturing overhead costs$322,500
Fixed manufacturing overhead costs$1,200,000
Product and process design costs$1,100,000
Marketing and distribution costs$1,125,000
For long-run pricing of the coffee tables, what price will most likely be used by Grounded Coffee?
A) $134.76
B) $161.70
C) $222.25
D) $266.70
10) Quick Connect manufactures high-tech cell phones. Quick Connect has a policy of adding a 20% markup to full costs and currently has excess capacity. The following information pertains to the company’s normal operations per month:
Output units1,250phones
Machine-hours750hours
Direct manufacturing labor-hours700hours
Direct materials per unit$20
Direct manufacturing labor per hour$8
Variable manufacturing overhead costs$175,000.00
Fixed manufacturing overhead costs$126,300
Product and process design costs$143,000
Marketing and distribution costs$153,645
For long-run pricing of the cell phones, what price will most likely be used by Quick Connect?
A) $95.00
B) $135.00
C) $175.00
D) $210.00
11) Which one of the following activities would most likely be considered a long-run pricing decision?
A) one-time-only special order pricing
B) product mix adjustments in a competitive market
C) setting prices to generate a reasonable rate of return on investment
D) changing prices in response to weak demand
12) Short-run prices should at least recover ________.
A) full cost of producing a product
B) fixed manufacturing overhead
C) variable cost of producing a product
D) variable and fixed manufacturing overhead
