Question 1

Kringle Company produces holiday ornaments that it sells to its regular customers for $12 per unit. The cost to produce each unit is $9, of which $6 is variable per unit and $3 is fixed per unit. A local charity has asked Kringle Company to produce 1,000 ornaments for its annual charity fund raising event as a gift for each donation. The charity is asking for a special pricing offer at $8 per unit instead of the normal $12 per unit. The ornaments will not require any customization, and Kringle Company currently has sufficient excess operating capacity to manufacture the 1,000 special order ornaments. Should Kringle Company accept the special-order proposal from the local charity. (Show all computations to support your decision.)

Accepted Answer

The answer of Kringle Company produces holiday ornaments that it...

Question 2

Stocks Cake Factory normally sells their specialty pound cake for $25. A special order to buy 100 pound cakes for $20 per pound cake was made by an organization hosting a charity event in Philadelphia. The variable cost per cake is $12 and the fixed cost per cake is $3. Assuming Stocks Cake Factory has sufficient excess capacity to fill the special order, determine the differential income or loss per cake from selling the pound cakes if Stocks were to accept this special order.

Accepted Answer

The answer of Stocks Cake Factory normally sells their specialty...

Question 3

Khan Manufacturing Company has the following unit manufacturing cost for products currently sold to outside customers:  A special order for 3,000 units has been received from a foreign company. The unit price requested is $65. The normal unit price is $90. If the order is accepted, unit variable costs will increase by $2 for additional shipping costs. The company currently has excess operating capacity. If the order is accepted, what will the differential operating income or loss be?

Accepted Answer

The answer of Khan Manufacturing Company has the following unit...

Question 4

Ghangi Manufacturing Company has the following unit manufacturing cost for products currently sold to outside customers:  A special order for 3,000 units has been received from a foreign company. The unit price requested is $65. The normal unit price is $90. If the order is accepted, unit variable costs will increase by $2 for additional shipping costs and since the company currently does not have sufficient excess operating capacity, an additional fixed cost of $10,000 would have to be incurred to lease additional production space without affecting present sales to outside customers. If the order is accepted, what will the differential operating income or loss be?

Accepted Answer

The answer of Ghangi Manufacturing Company has the following unit...

Question 5

Millennial Manufacturing incurs $38 of variable costs and $22 of allocated fixed costs in the production of an ergonomic backpack that normally sells for $90. A buyer in Canada offers to purchase 5,000 units at $56 each. Millennial Manufacturing has excess capacity and can handle the additional production. What effect will acceptance of this offer have on the company's operating income?

Accepted Answer

The answer of Millennial Manufacturing incurs $38 of variable costs...

Question 6

Sustainable Solutions, LLC makes bracelets from recycled plastic. Each bracelet costs $6 to produce, of which $4 is variable and $2 is fixed. If Sustainable Solutions applies a 30% markup to each bracelet, what is the selling price for a single bracelet?

Accepted Answer

The answer of Sustainable Solutions, LLC makes bracelets from recycled...

Question 7

Gizmos and Gadgets, Inc. produces and sells a mechanical model car kit that challenges young children to create a motorized model car. The cost associated with the parts for the car kit include variable costs of $18 and fixed costs of $7. If the company expects to recognize a profit based on a markup of 40%, what is the expected selling price for each car kit?

Accepted Answer

The answer of Gizmos and Gadgets, Inc. produces and sells...

Question 8

Lumina Industries produces and sells outdoor solar lighting fixtures. A solar spotlight has a total cost of $40 per unit, of which $30 is variable cost and $10 is fixed cost. The desired profit is $10 per unit. Determine the markup percentage on total cost.

Accepted Answer

The answer of Lumina Industries produces and sells outdoor solar...

Question 9

Pignatello Products has a new product coming to market next year. The following projections for production and sales are for the upcoming year at given below.  Using a cost-plus pricing approach, what is the expected selling price per unit?

Accepted Answer

The answer of Pignatello Products has a new product coming...

Question 10

Holiday Hosting Company has the following per unit information available for its new product:  What would Holiday Hosting Company's markup percentage be using a cost-plus pricing approach on total cost?

Accepted Answer

The answer of Holiday Hosting Company has the following per...

Question 11

Juanita Company sells a product in a competitive marketplace. Market analysis indicates that its product would probably sell at $46 per unit. Juanita Company management has budgeted for operating income of $4 per unit at a volume of 10,000 units. Their current full cost per unit for the product is $43 per unit. What is the target cost of the Juanita Company's product?

Accepted Answer

The answer of Juanita Company sells a product in a...

Question 12

Crescent Computers produces a combination wireless computer keyboard and mouse. The market for this product combination is very competitive. The current market price for a wireless computer keyboard and mouse is $30. If Crescent Computers desires to make a profit of $9 per unit of the wireless computer keyboard and mouse, what is the target cost to manufacture the wireless computer keyboard and mouse?

Accepted Answer

The answer of Crescent Computers produces a combination wireless computer...

Question 13

Kissimee Corporation manufactures a high-performance product. It expects to produce and sell 50,000 of these products in the upcoming year. It has invested $15,000,000 to make these products and has a desired return on investment (ROI) of 20%. If the current market price for similar high-performance products is $500, what is Kissimee Corporation's target cost for the product?

Accepted Answer

The answer of Kissimee Corporation manufactures a high-performance product. It...

Question 14

Nissan uses target costing. Assume that the company expects the market selling price for a compact sedan model is going to be $27,000 for the upcoming year and expects to sell 5,000 of this model. If Nissan has invested assets of $100,000,000 with a ROI required of 12%, what is the target cost for a Nissan compact sedan model for the upcoming year?

Accepted Answer

The answer of Nissan uses target costing. Assume that the...

Question 15

Sports Fanatics, Inc. is interested in selling Tampa Bay Buccaneers NFL logo key rings. Market research indicates that that 10,000 units can be sold if the price is no more than $8 per key ring, due to its Superbowl win last year. If Sports Fanatics, Inc. decides to produce the key rings, it will need to invest $200,000 in new production equipment. If Sports Fanatics, Inc. desires to earn a minimum rate of return of 15%, what is the target cost for each key ring?

Accepted Answer

The answer of Sports Fanatics, Inc. is interested in selling...

Question 16

Given below are business practices related to pricing situations, Match the descriptions with the appropriate pricing term
-Taking advantage of consumers in need by charging them excessively high prices for necessities or basic items.

Accepted Answer

Price gouging refers to the practice of raising prices on essential goods to an excessively high level, often during emergencies or shortages, taking advantage of consumers' urgent needs.

Question 17

Given below are business practices related to pricing situations, Match the descriptions with the appropriate pricing term
-Selling products at a lower price internationally than in the home country.

Accepted Answer

Dumping refers to the practice of selling products in a foreign market at a price lower than in the home country, often below cost, to gain market share or eliminate competition.

Question 18

Given below are business practices related to pricing situations, Match the descriptions with the appropriate pricing term
-Charging a higher price for a product/service when there is limited availability of the product/service (demand is greater than supply)

Accepted Answer

The answer of Given below are business practices related to...

Question 19

Given below are business practices related to pricing situations, Match the descriptions with the appropriate pricing term
-Intentionally selling products at prices that are lower than their costs to drive out competition.

Accepted Answer

Predatory pricing involves setting prices low with the intent to eliminate competition, after which prices may be increased.

Question 20

Given below are business practices related to pricing situations, Match the descriptions with the appropriate pricing term
-Charging a different price to different consumer segments for the same product/service.

Accepted Answer

Price discrimination involves charging different prices to different consumer segments for the same product or service, based on factors like willingness to pay, age, location, etc.

Quiz 16: The Art and Science of Pricing to Optimize Revenue

Sustainable Solutions, LLC makes bracelets from recycled plastic. Each bracelet costs $6 to produce, of which $4 is variable and $2 is fixed. If Sustainable Solutions applies a 30% markup to each bracelet, what is the selling price for a single bracelet?

Lumina Industries produces and sells outdoor solar lighting fixtures. A solar spotlight has a total cost of $40 per unit, of which $30 is variable cost and $10 is fixed cost. The desired profit is $10 per unit. Determine the markup percentage on total cost.

Pignatello Products has a new product coming to market next year. The following projections for production and sales are for the upcoming year at given below. Using a cost-plus pricing approach, what is the expected selling price per unit?

Holiday Hosting Company has the following per unit information available for its new product: What would Holiday Hosting Company's markup percentage be using a cost-plus pricing approach on total cost?

Given below are business practices related to pricing situations, Match the descriptions with the appropriate pricing term -Taking advantage of consumers in need by charging them excessively high prices for necessities or basic items.

Given below are business practices related to pricing situations, Match the descriptions with the appropriate pricing term -Selling products at a lower price internationally than in the home country.

Given below are business practices related to pricing situations, Match the descriptions with the appropriate pricing term -Charging a higher price for a product/service when there is limited availability of the product/service (demand is greater than supply)

Given below are business practices related to pricing situations, Match the descriptions with the appropriate pricing term -Intentionally selling products at prices that are lower than their costs to drive out competition.

Given below are business practices related to pricing situations, Match the descriptions with the appropriate pricing term -Charging a different price to different consumer segments for the same product/service.