Cost acounting CHAPTER 12.docVIP

CHAPTER 12 PRICING DECISIONS AND COST MANAGEMENT TRUE/FALSE 1. Companies must always examine pricing decisions through the eyes of their customers. 2. Relevant costs for pricing decisions include manufacturing costs, but not costs from other value-chain functions. 3. In markets with little or no competition, the key factor affecting price is costs, not customers’ willingness to pay or competitors. 4. When prices are set in a competitive marketplace, product costs are the most important influence on pricing decisions. 5. Customers prefer stable and predictable prices over a long time horizon. 6. Target pricing is a form of cost-based pricing. 7. Value engineering has the objective of reducing costs while still satisfying customer needs. 8. For manufacturing firms, product costs are generally locked in during the manufacturing stage. 9. Spending more on the design phase of a new product usually reduces subsequent product-related costs. 10. Kaizen costing focuses on improving productivity and eliminating waste through continuous improvements. 11. In cost-plus pricing, the markup is a rigid number that determines the actual selling price. 12. A full-cost base rather than a variable-cost base is a better guide for discounting decisions that may affect long-term customers. 13. Price dumping occurs when a domestic company is trying to get rid of out-of-style products at a substantially reduced price. MULTIPLE CHOICE 14. Companies should ONLY produce and sell units as long as: a. there is customer demand for the product b. the competition allows it c. the revenue from an additional unit exceeds the cost of producing it d. there is a generous supply of low-cost direct materials 15. Fluctuations in exchange rates between different currencies can influence the: a. cost of products using foreign suppliers b. pricing of alternative products offered by foreign competitors c. demand for products of foreign competitors d. All of these answers are correct. 16. Three major