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Exam 24: Differential Analysis and Product Pricing

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Question 91

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The amount of increase or decrease in revenue that is expected from a particular course of action as compared with an alternative is

A) manufacturing margin
B) contribution margin
C) differential cost
D) differential revenue

E) C) and D)
F) A) and C)

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Question 92

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The variable cost per unit for the production and sale of the company's product is

A) $14.00
B) $12.60
C) $9.80
D) $11.20

E) B) and D)
F) B) and C)

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Question 93

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Match each of the definitions that follow with the term (a-e) it defines. -A document that initiates a product or process change

The dollar amount of desired profit from the production and sale of the company's product is

Differential revenue is the amount of increase or decrease in revenue expected from a particular course of action as compared with an alternative.

What cost concept used in applying the cost-plus approach to product pricing covers selling expenses,administrative expenses,and desired profit in the markup?

Determine the markup percentage on product cost.

What pricing concept considers the price that other providers charge for the same product?

Mighty Safe Fire Alarm is currently buying 50,000 motherboards from MotherBoard,Inc.at a price of $65 per board.Mighty Safe is considering making its own boards.The costs to make the board are as follows: direct materials,$32 per unit; direct labor,$10 per unit; and variable factory overhead,$16.00 per unit.Fixed costs for the plant would increase by $75,000.Which option should be selected and why?

Heston and Burton,CPA's,currently work a five-day week.They estimate that net income for the firm would increase by $75,000 annually if they worked an additional day each month.The cost associated with the decision to continue the practice of a five-day work week is an example of a(n)

Piper Corp.is operating at 70% of capacity and is currently purchasing a part used in its manufacturing operations for $24 per unit.The unit cost for the business to make the part is $36,including fixed costs,and $26,not including fixed costs.If 15,000 units of the part are normally purchased during the year but could be manufactured using unused capacity,what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?

Ptarmigan Company produces two products.Product A has a contribution margin of $20 and requires 4 machine hours.Product B has a contribution margin of $18 and requires 3 machine hours.Determine the most profitable product assuming the machine hours are the constraint.

Which equation better describes target costing?