The pricing objective of maximizing profits:

       1 has not been affected by other, more socially focused concerns. 
       2 is to be implemented under any and all circumstances. 
       3 has not always been considered the underlying objective of any pricing policy. 
       4 must be considered when determining the price needed to increase market share.

To stay in business, a company must have a selling price that is:
       1 acceptable to the customer. 
       2 able to recover the variable costs of production. 
       3 the highest in the marketplace. 
       4 equal to or lower than the company's costs per unit.

An internal issue to be considered when setting a price is:
       1 whether the process is labor-intensive or automated. 
       2 the customer's preferences for quality versus price. 
       3 current prices of competing products or services. 
       4 the life of the product or service.

An external issue to be considered when setting a price is:
       1 the variable costs of the product or service. 
       2 the desired rate of return. 
       3 the quality of materials and labor. 
       4 the number of competing products or services. 
Fixed costs that change for activity outside the relevant range would include:
       1 supervision costs. 
       2 electricity costs. 
       3 production supplies costs. 
       4 raw materials costs. 
When gross margin pricing is used, the markup percentage includes:
       1 desired profits plus total selling, general, and administrative expenses. 
       2 only the desired profit factor. 
       3 total costs and expenses. 
       4 desired profits plus total fixed production costs plus total selling, general, and administrative expenses. 
The return on assets pricing method:
       1 has very little appeal and support. 
       2 has a primary objective of earning a minimum rate of return on assets. 
       3 is a crude approach to pricing and should be used as a last resort. 
       4 replaces the desired rate of return used in cost-based pricing methods with a desired profit objective. 
The pricing method that establishes selling prices based on a stipulated rate above total production costs is:
       1 return on assets pricing. 
       2 target cost pricing. 
       3 gross margin pricing. 
       4 time and materials pricing. 
A major advantage of the target costing approach to pricing is that target costing:
       1 allows a company to analyze the potential profit of a product before spending money to produce the product. 
       2 is not dependent on customers' quality versus price decisions. 
       3 identifies unproductive assets. 
       4 anticipates the product's profitability midway through its life cycle. 
Use of market transfer prices:
       1 is the only acceptable approach in a free enterprise economy. 
       2 usually does not cause the selling division to ignore negotiating attempts by the buying division. 
       3 may cause an internal shortage of materials. 
       4 usually does not work against the operating objectives of the company as a whole. 
The variables to be considered in the capital investment decision are:
       1 expected life, estimated cash flow, and investment cost. 
       2 expected life, estimated cost, and projected capital budget. 
       3 estimated cash flow, investment cost, and corporate objectives. 
       4 economic conditions, economic policies, and corporate objectives. 
Another term for the minimum rate of return is the:
       1 payback rate. 
       2 discounted rate. 
       3 capital rate. 
       4 hurdle rate. 
The after-tax amount is used for which of the following components of the cost of capital?
       1 Cost of debt 
       2 Cost of common stock 
       3 Cost of preferred stock 
       4 Cost of retained earnings 
Capital investment proposals should be ranked in decreasing order of:
       1 length in years. 
       2 dollar amount required. 
       3 residual value expected. 
       4 rate of return. 
Which of the following items is irrelevant to capital investment analysis?
       1 Investment cost 
       2 Residual value 
       3 Carrying value 
       4 Net cash flows 
The carrying value of a fixed asset is equal to its:
       1 current disposal value. 
       2 current replacement cost. 
       3 original cost. 
       4 undepreciated balance. 
Which of the following items can be described as a noncash expense?
       1 Wages 
       2 Advertising 
       3 Income taxes 
       4 Depreciation 
The time value of money concept is given consideration in long-range investment decisions by:
       1 assuming equal annual cash flow patterns. 
       2 assigning greater value to more immediate cash flows. 
       3 weighting cash flows with subjective probabilities. 
       4 investing only in short-term projects. 
The net present value method of evaluating proposed investments:
       1 discounts cash flows at the minimum rate of return. 
       2 ignores cash flows beyond the payback period. 
       3 applies only to mutually exclusive investment proposals. 
       4 measures a project's time-adjusted rate of return. 
The payback period is defined as the amount of time in years for the sum of:
       1 future net incomes to equal the original investment. 
       2 net future cash inflows to equal the original investment. 
       3 net present value of future cash inflows to equal the original investment. 
       4 net future cash outflows to equal the original investment.