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Exam 9: Differential Analysis, Product Pricing, and Activity-Based Costing

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Question 21

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The product cost concept includes all manufacturing costs in the cost amount to which the markup is added to determine product price.

A) True
B) False

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Question 22

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Discontinuing a segment or product may not be the best choice when the segment is contributing to fixed expenses.

A) True
B) False

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Question 23

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The amount of income that would result from an alternative use of cash is called:

Match the definitions that follow with the term a-e it defines. -Sets the price according to demand

Rowan Quinn Company manufactures kitchen appliances.Currently, it is manufacturing one of its components at a variable cost of $40 and fixed costs of $15 per unit.An outside provider of this component has offered to sell Rowan Quinn the component for $45.Determine the best plan and calculate the savings.

The markup percentage on total cost for the company's product is

When a segment of a company is showing a net loss, it is always best to discontinue the segment in order not to continue with losses.

The unit selling price for the company's product is

A bottleneck begins when demand for the company's product exceeds the ability to produce the product.

When using the variable cost concept of applying the cost-plus approach to product pricing, what is included in the markup?

Match each of the definitions that follow with the term a-e it defines. -Revenue forgone from an alternative use of an asset

Make-or-buy options often arise when a manufacturer has excess productive capacity in the form of unused equipment, space, and labor.

Determine the markup percentage on total cost.

Since the costs of producing an intermediate product do not change regardless of whether the intermediate product is sold or processed further, these costs are not considered in deciding whether to further process a product.

If the company meets the new target cost number, how much will it have to cut costs per unit, if any?

Match the definitions that follow with the term a-e it defines. -Sets the price according to competitors

Relevant revenues and costs refer to

Assuming that Widgeon Co.can sell all of the products it can make, what is the maximum contribution margin it can earn per month?

Hadley Company is considering the disposal of equipment that is no longer needed for operations.The equipment originally cost $600,000 and accumulated depreciation to date totals $460,000.An offer has been received to lease the machine for its remaining useful life for a total of $290,000, after which the equipment will have no salvage value.The repair, insurance, and property tax expenses that would be incurred by Hadley on the machine during the period of the lease are estimated at $75,800.Alternatively, the equipment can be sold through a broker for $230,000 less a 10% commission. Prepare a differential analysis report, dated June 15, on whether the equipment should be leased or sold.

Yakking Co.manufactures mobile cellular equipment and develops a price for the product by using the variable cost concept.Yakking incurs variable costs of $1,900,000 in the production of 100,000 units while fixed costs total $50,000.The company employs $4,725,000 of assets and wishes to earn a profit equal to a 10% rate of return on assets. a Compute a markup percentage based on variable cost. b Determine a selling price.