Question 1. Short-run pricing decisions include

• pricing a main product in a major market.
• considering all costs in the value-chain of business functions.
• adjusting product mix and volume in a competitive market while maintaining a stable price if demand fluctuates from strong to weak.
• pricing for a special order with no long-term implications.

Question 2. The first step in implementing target pricing and target costing is

• choosing a target price.
• determining a target cost.
• developing a product that satisfies needs of potential customers.
• performing value engineering.

Question 3. The markup percentage is usually higher if the cost base used is

• the full cost of the product.
• the variable cost of the product.
• variable manufacturing costs.
• total manufacturing costs.

Question 4. Life-cycle costing is the name given to

• a method of cost planning to reduce manufacturing costs to targeted levels.
• the process of examining each component of a product to determine whether its cost can be reduced.
• the process of managing all costs along the value chain.
• a system that focuses on reducing costs during the manufacturing cycle.

Question 5. Each month, Haddon Company has $275,000 total manufacturing costs (20% fixed) and $125,000 distribution and marketing costs (36% fixed). Haddon's monthly sales are $500,000. The markup percentage on variable costs to arrive at the existing (target) selling price is

• 20%.
• 40%.
• 80%.
• 66 2/3 %.

Question 6.6. (TCO 8) The benefits of a decentralized organization are greater when a company

• is large and unregulated.
• is facing great uncertainties in their environment.
• has few interdependencies among division.
• All of the above

Question 7. A transfer-pricing method leads to goal congruence when managers

• always act in their own best interest.
• act in their own best interest and the decision is in the long-term best interest of the manager's subunit.
• act in their own best interest and the decision is in the long-term best interest of the company.
• act in their own best interest and the decision is in the short-term best interest of the company.

Question 8. A benefit of using a market-based transfer price is the

• profits of the transferring division are sacrificed for the overall good of the corporation.
• profits of the division receiving the products are sacrificed for the overall good of the corporation.
• economic viability and profitability of each division can be evaluated individually.
• None of the above

Question 9. When companies do not want to use market prices or find it too costly, they typically use ________ prices, even though suboptimal decisions may occur.

• short-run average cost
• long-run cost
• average-cost
• full-cost

Question 10. The seller of Product A has no idle capacity and can sell all it can produce at $20 per unit. Outlay cost is $4. What is the opportunity cost, assuming the seller sells internally?

• $4
• $16
• $20
• $24