Question : 51) Seneca Company has invested $1,000,000 in a plant to make : 1196077

 

51)

Seneca Company has invested $1,000,000 in a plant to make gas pumps for service stations. The average long-run income desired from the plant is $150,000 annually. The annual cost base for each pump is $1,000. What should be the prospective selling price for each pump if the company uses a target return on investment as the markup base? 51)

______ A)

$16,000 B)

$2,500 C)

$1,150 D)

$17,500 E)

$17,000

52)

A product’s markup percentage would need to cover fixed manufacturing costs if, 52)

______ A)

the company wants to make a profit. B)

the company has only fixed manufacturing costs. C)

the cost base does not include fixed manufacturing costs. D)

the cost base includes fixed manufacturing costs as well as variable costs. E)

the company wants to break even during the fiscal period.

53)

Survey evidence suggest that most companies use which type of cost when making pricing decisions? 53)

______ A)

cost-plus B)

variable manufacturing costs C)

variable product costs D)

full product costing E)

manufacturing function costs

54)

Johnson Petroleum Company is considering pricing its 5,000 litre petroleum tanks using either variable manufacturing or full product costs as the base. The variable cost base provides a prospective price of $2,800 and the full cost base provides a prospective price of $2,850. The difference between the two prices is 54)

______ A)

due to the fact that the variable cost base must estimate all fixed costs, other variable costs, and desired profit while the full cost base must estimate only desired profit. B)

the amount of profit to be included. C)

caused by the inability of most companies to estimate fixed cost per unit with any degree of reliability. D)

known as peak pricing. E)

known as price discrimination.

55)

Price discrimination to customers is the practice of, 55)

______ A)

using variable costing for some products and full costing for other products when setting prices. B)

changing prices frequently. C)

charging different prices for quantity amounts. D)

setting different prices for different products. E)

charging different prices to different customers or clients for the same products or services.

56)

A utility company charges its high-usage commercial customers a lower rate per kilowatt hour than other customers. This is an example of 56)

______ A)

price discrimination. B)

off-load pricing. C)

peak-load pricing. D)

high-load pricing. E)

customer-preference pricing.

57)

Life-cycle budgeting differs from life-cycle costing in that 57)

______ A)

budgeting is for the development and production of a product while costing is for only the production activities. B)

budgeting includes revenues, and costing includes only the costs. C)

budgeting includes revenues and costs, and costing includes only the costs. D)

budgeting includes all products of a company and costing is only for individual products. E)

budgeting is for one accounting period and is a total dollar concept while costing is a per unit concept.

58)

Satellite, Inc., is in the process of evaluating its new products. A new signal receiver has two production runs each year, each with $20,000 in setup costs. The new receiver incurred $20,000 in development costs and is expected to be produced for three years. The direct costs of producing the receivers are $80,000 per run of 5,000 receivers. Indirect manufacturing costs charged to each run are $90,000. Destination charges for each receiver average $2.00. Customer service expenses average $0.40 per receiver. The receivers are going to sell for $50 the first year and increase by $6 each year thereafter. Sales units equal production units each year.

What is the life-cycle budgeted revenue? 58)

______ A)

$1,680,000 B)

$1,850,000 C)

$560,000 D)

$500,000 E)

$620,000

59)

Satellite, Inc., is in the process of evaluating its new products. A new signal receiver has two production runs each year. Setup costs are $20,000 per setup. The new receiver incurred $60,000 in development costs and is expected to be produced for three years. The direct costs of producing the receivers are $80,000 per run of 5,000 receivers. Indirect manufacturing costs charged to each run are $90,000. Destination charges for each receiver average $2.00. Customer service expenses average $0.40 per receiver. The receivers are going to sell for $50 the first year and increase by $6 each year thereafter. Sales units equal production units each year.

What is the life cycle operating income? 59)

______ A)

$340,000 B)

$408,000 C)

$326,000 D)

$411,000 E)

$268,000

60)

Satellite, Inc., is in the process of evaluating its new products. A new signal receiver has two production runs each year. Setup costs are $20,000 per setup. The new receiver incurred $60,000 in development costs and is expected to be produced for three years. The direct costs of producing the receivers are $80,000 per run of 5,000 receivers. Indirect manufacturing costs charged to each run are $90,000. Destination charges for each receiver average $2.00. Customer service expenses average $0.40 per receiver. The life cycle revenue has been determined to be $1,500,000.

What is the life-cycle operating income? 60)

______ A)

$299,000 B)

$228,000 C)

$268,000 D)

$148,000 E)

$208,000