Quiz 11
Question 1
Tory Company sells a single product. Troy estimates demand
and costs at various activity levels as follows:
Units Sold Price Total Variable Costs Fixed Costs
120,000 $48 $3,000,000 $1,000,000
151,500 $45 $3,520,000 $1,000,000
160,000 $40 $4,000,000 $1,000,000
180,000 $35 $4,500,000 $1,000,000
200,000 $30 $5,000,000 $1,000,000
How much profit will Troy have if a price of $45 is charged?
Question 2
The Falling Snow Company is considering production of a
lighted world globe that the company would price at a markup of 0.25 percent
above full cost. Management estimates that the variable cost of the globe will
be $70 per unit and fixed costs per year will be $240,000.
Assuming sales of 1,200 units, what is the full cost of a
globe with a 0.25 markup?
Question 3
A company believes it can sell 6,000,000 of its proposed new
optical mouse at a price of $11.00 each. There will be $8,000,000 in fixed
costs associated with the mouse. If the company desires to make a profit
$2,000,000 on the mouse, what is the target variable cost per mouse?
Question 4
Wizard Corporation has analyzed their customer and order
handling data for the past year and has determined the following costs:
Order processing cost per order $7
Additional costs if order must be expedited (rushed) $9.00
Customer technical support calls (per call) $12
Relationship management costs (per customer per year) $1200
In addition to these costs, product costs amount to 75%
In the prior year, Wizard had the following experience with
one of its customers, Chester Company:
Sales $16,000
Number of orders
160
Percent of orders marked rush .70
Calls to technical support
80
Required:
Calculate the profitability of the Chester Company account.
Question 5
When a firm adds a predetermined percentage to the cost of
its product for pricing purposes, it is called:
incremental pricing
demand pricing
cost-plus pricing
cost plus demand pricing
Question 6
PowerDrive, Inc. produces a hard disk drive that sells for
$175 per unit. The cost of producing 25,000 drives in the prior year was:
Direct material $625,000
Direct labor 375,000
Variable overhead 125,000
Fixed overhead 1,500,000
Total cost $2,625,000
At the start of the current year, the company received an
order for 3,000 drives from a computer company in China. Management of
PowerDrive has mixed feelings about the order. On the one hand they welcome the
order because they currently have excess capacity. Also, this is the companys
first international order. On the other hand, the company in China is willing
to pay only $130 per unit.
What will be the effect on profit of accepting the order?
Profit $255,000
Question 7
Another name for menu-based pricing is:
Cost-plus pricing
Customer profitability pricing
Profit maximizing pricing
Activity-based pricing
Question 8
A company has $35 per unit in variable costs and $1,200,000
per year in fixed costs. Demand is estimated to be 108,000 units annually. What
is the price if a markup of 40% on total cost is used to determine the price?
Quiz 11Question 1Tory Company sells a single product. Troy estimates demand
and costs at various activity levels as follows:Units Sold Price Total Variable Costs Fixed Costs120,000 $48 $3,000,000 $1,000,000151,500 $45 $3,520,000 $1,000,000160,000 $40 $4,000,000 $1,000,000180,000 $35 $4,500,000 $1,000,000200,000 $30 $5,000,000 $1,000,000How much profit will Troy have if a price of $45 is charged? Question 2The Falling Snow Company is considering production of a
lighted world globe that the company would price at a markup of 0.25 percent
above full cost. Management estimates that the variable cost of the globe will
be $70 per unit and fixed costs per year will be $240,000.Assuming sales of 1,200 units, what is the full cost of a
globe with a 0.25 markup? Question 3A company believes it can sell 6,000,000 of its proposed new
optical mouse at a price of $11.00 each. There will be $8,000,000 in fixed
costs associated with the mouse. If the company desires to make a profit
$2,000,000 on the mouse, what is the target variable cost per mouse? Question 4Wizard Corporation has analyzed their customer and order
handling data for the past year and has determined the following costs: Order processing cost per order $7 Additional costs if order must be expedited (rushed) $9.00 Customer technical support calls (per call) $12 Relationship management costs (per customer per year) $1200 In addition to these costs, product costs amount to 75%
In the prior year, Wizard had the following experience with
one of its customers, Chester Company:
Sales $16,000 Number of orders
160 Percent of orders marked rush .70 Calls to technical support
80 Required: Calculate the profitability of the Chester Company account. Question 5When a firm adds a predetermined percentage to the cost of
its product for pricing purposes, it is called: incremental pricing demand pricing cost-plus pricing cost plus demand pricingQuestion 6PowerDrive, Inc. produces a hard disk drive that sells for
$175 per unit. The cost of producing 25,000 drives in the prior year was: Direct material $625,000Direct labor 375,000Variable overhead 125,000Fixed overhead 1,500,000Total cost $2,625,000At the start of the current year, the company received an
order for 3,000 drives from a computer company in China. Management of
PowerDrive has mixed feelings about the order. On the one hand they welcome the
order because they currently have excess capacity. Also, this is the companys
first international order. On the other hand, the company in China is willing
to pay only $130 per unit. What will be the effect on profit of accepting the order? Profit $255,000Question 7Another name for menu-based pricing is: Cost-plus pricing Customer profitability pricing Profit maximizing pricing Activity-based pricingQuestion 8A company has $35 per unit in variable costs and $1,200,000
per year in fixed costs. Demand is estimated to be 108,000 units annually. What
is the price if a markup of 40% on total cost is used to determine the price?
