Question 1

A negotiated transfer price should be used when an outside market for the goods does NOT exist.

Accepted Answer

A) True 
 B)False

Question 2

Market-based prices are least likely to be influenced by

Accepted Answer

A)  the degree of product differentiation in the industry.
B)  the level of competition in the industry.
C)  the cost to manufacture the product or service.
D)  if the product is a commodity.

Question 3

The transfer price approach that is often considered the best approach because it generally provides the proper economic incentives is the

Accepted Answer

A)  cost-based approach.
B)  market-based approach.
C)  negotiated price approach.
D)  time-and-material pricing approach.

Question 4

Use the following information for questions 
The following data are available for Wheels 'N Spokes Repair Shop for 2016:   Repair technician’s wages $150,000 Fringe benefits 50,000 Overhead 80,000 Total $280,000\begin{array} { l r } 	ext { Repair technician&#x27;s wages } & \$ 150,000 \	ext { Fringe benefits } & 50,000 \	ext { Overhead } & { 80,000 } \	ext { Total } & \$ 280,000\end{array} Repair technician’s wages  Fringe benefits  Overhead  Total ​$150,00050,00080,000$280,000​  The desired profit margin is $15 per labour hour.The material loading charge is 35% of invoice cost.It is estimated that 4,000 labour hours will be worked in 2016.
-In March 2016, Wheels 'N Spokes repairs a bicycle that takes three hours to repair and uses parts of $70.The bill for this repair would be

Accepted Answer

A)  $244.50.
B)  $289.50.
C)  $304.50.
D)  $349.50.

Question 5

In a competitive environment, the company must set a target cost and a target selling price.

Accepted Answer

A) True 
 B)False

Question 6

Factors that can affect pricing decisions include all of the following EXCEPT

Accepted Answer

A)  cost considerations.
B)  environment.
C)  pricing objectives.
D)  all of these are factors.

Question 7

In time-and-material pricing, the material charge is based on the cost of direct materials used and a material loading charge for related overhead costs.

Accepted Answer

A) True 
 B)False

Question 8

The mark-up percentage in the absorption cost approach is calculated by dividing the sum of the desired ROI per unit and

Accepted Answer

A)  fixed costs per unit by manufacturing cost per unit.
B)  fixed costs per unit by variable costs per unit.
C)  selling and administrative expenses per unit by manufacturing cost per unit.
D)  selling and administrative expenses per unit by variable costs per unit.

Question 9

Cuff budgets sales of its truck tires at $160 per tire and estimates that 10,000 tires can be sold during the coming year.Variable costs per tire are $60 and Cuff desires a profit of $30 per tire.The target cost per tire is

Accepted Answer

A)  $160.
B)  $130.
C)  $80.
D)  $100.

Question 10

In time-and-material pricing, the charge for a particular job is the sum of the labour charge and the

Accepted Answer

A)  materials charge.
B)  material loading charge.
C)  materials charge + desired profit.
D)  materials charge + the material loading charge.

Question 11

Market-based pricing is influenced by all of the following EXCEPT

Accepted Answer

A)  government regulation.
B)  internal transfer prices.
C)  product differentiation.
D)  demand for the product.

Question 12

The first step in the absorption cost approach is to calculate the mark-up percentage used in setting the target selling price.

Accepted Answer

A) True 
 B)False

Question 13

Divisions within vertically integrated companies normally sell goods only to other divisions within the same company.

Accepted Answer

A) True 
 B)False

Question 14

A problem with a cost-based transfer price is that it does NOT provide adequate incentive for the selling division to control costs.

Accepted Answer

A) True 
 B)False

Question 15

What would be a legitimate reason for upper management to insist on an internal transfer even though the product could be sourced outside the company at a price that is lower than the company's variable cost?

Accepted Answer

A)  Management is concerned that its manufacturing equipment will soon be obsolete, and it wants to get full use out of it before it happens.
B)  Management wants to ensure a secure supply of the product.
C)  The company has excess capacity.
D)  There is never a legitimate reason that justifies an internal transfer if a product can be sourced outside the company at a price that is lower than the company's variable cost.

Question 16

All of the following are approaches for determining a transfer price EXCEPT the

Accepted Answer

A)  cost-based approach.
B)  market-based approach.
C)  negotiated approach.
D)  time-and-material approach.

Question 17

The first step for time-and-material pricing is to calculate the

Accepted Answer

A)  charge for obtaining materials.
B)  charge for holding materials.
C)  labour charge per hour.
D)  charges for a particular job.

Question 18

If a cost-based transfer price is used, the transfer price must be based on variable cost.

Accepted Answer

A) True 
 B)False

Question 19

All of the following are correct statements about the market-based approach EXCEPT that it

Accepted Answer

A)  assumes that the transfer price should be based on the most objective inputs possible.
B)  provides a fairer allocation of the company's contribution margin to each division.
C)  produces a higher company contribution margin than the cost-based approach.
D)  ensures that each division manager is properly motivated and rewarded.

Question 20

The reasons for using the variable cost-plus approach include all of the following EXCEPT this approach:

Accepted Answer

A)  avoids arbitrary allocation of common fixed costs to individual product lines.
B)  is more consistent with cost-volume-profit analysis.
C)  provides the most defensible bases for justifying prices to all interested parties.
D)  provides the type of data managers need for pricing special orders.

Exam 9: Pricing

The first step for time-and-material pricing is to calculate the

Correct Answer
verified

In a competitive environment, the company must set a target cost and a target selling price.

Correct Answer
verified

Correct Answer
verified

Divisions within vertically integrated companies normally sell goods only to other divisions within the same company.

Correct Answer
verified

Market-based prices are least likely to be influenced by

Correct Answer
verified

In time-and-material pricing, the charge for a particular job is the sum of the labour charge and the

Correct Answer
verified

All of the following are approaches for determining a transfer price EXCEPT the

Correct Answer
verified

In time-and-material pricing, the material charge is based on the cost of direct materials used and a material loading charge for related overhead costs.

Correct Answer
verified

What would be a legitimate reason for upper management to insist on an internal transfer even though the product could be sourced outside the company at a price that is lower than the company's variable cost?

Correct Answer
verified

Market-based pricing is influenced by all of the following EXCEPT

Correct Answer
verified

The reasons for using the variable cost-plus approach include all of the following EXCEPT this approach:

Correct Answer
verified

All of the following are correct statements about the market-based approach EXCEPT that it

Correct Answer
verified

A negotiated transfer price should be used when an outside market for the goods does NOT exist.

Correct Answer
verified

The mark-up percentage in the absorption cost approach is calculated by dividing the sum of the desired ROI per unit and

Correct Answer
verified

If a cost-based transfer price is used, the transfer price must be based on variable cost.

Correct Answer
verified

Cuff budgets sales of its truck tires at $160 per tire and estimates that 10,000 tires can be sold during the coming year.Variable costs per tire are $60 and Cuff desires a profit of $30 per tire.The target cost per tire is

Correct Answer
verified

The transfer price approach that is often considered the best approach because it generally provides the proper economic incentives is the

Correct Answer
verified

A problem with a cost-based transfer price is that it does NOT provide adequate incentive for the selling division to control costs.

Correct Answer
verified

Factors that can affect pricing decisions include all of the following EXCEPT

Correct Answer
verified

The first step in the absorption cost approach is to calculate the mark-up percentage used in setting the target selling price.

Correct Answer
verified

Exam 9: Pricing

The first step for time-and-material pricing is to calculate the

Correct AnswerverifiedShow Answer

In a competitive environment, the company must set a target cost and a target selling price.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Divisions within vertically integrated companies normally sell goods only to other divisions within the same company.

Correct AnswerverifiedShow Answer

Market-based prices are least likely to be influenced by

Correct AnswerverifiedShow Answer

In time-and-material pricing, the charge for a particular job is the sum of the labour charge and the

Correct AnswerverifiedShow Answer

All of the following are approaches for determining a transfer price EXCEPT the

Correct AnswerverifiedShow Answer

In time-and-material pricing, the material charge is based on the cost of direct materials used and a material loading charge for related overhead costs.

Correct AnswerverifiedShow Answer

What would be a legitimate reason for upper management to insist on an internal transfer even though the product could be sourced outside the company at a price that is lower than the company's variable cost?

Correct AnswerverifiedShow Answer

Market-based pricing is influenced by all of the following EXCEPT

Correct AnswerverifiedShow Answer

The reasons for using the variable cost-plus approach include all of the following EXCEPT this approach:

Correct AnswerverifiedShow Answer

All of the following are correct statements about the market-based approach EXCEPT that it

Correct AnswerverifiedShow Answer

A negotiated transfer price should be used when an outside market for the goods does NOT exist.

Correct AnswerverifiedShow Answer

The mark-up percentage in the absorption cost approach is calculated by dividing the sum of the desired ROI per unit and

Correct AnswerverifiedShow Answer

If a cost-based transfer price is used, the transfer price must be based on variable cost.

Correct AnswerverifiedShow Answer

Cuff budgets sales of its truck tires at $160 per tire and estimates that 10,000 tires can be sold during the coming year.Variable costs per tire are $60 and Cuff desires a profit of $30 per tire.The target cost per tire is

Correct AnswerverifiedShow Answer

The transfer price approach that is often considered the best approach because it generally provides the proper economic incentives is the

Correct AnswerverifiedShow Answer

A problem with a cost-based transfer price is that it does NOT provide adequate incentive for the selling division to control costs.

Correct AnswerverifiedShow Answer

Factors that can affect pricing decisions include all of the following EXCEPT

Correct AnswerverifiedShow Answer

The first step in the absorption cost approach is to calculate the mark-up percentage used in setting the target selling price.

Correct AnswerverifiedShow Answer

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