Question

3) Making design decisions is an example of managing costs:

A) during planning phase; before they are incurred but are "locked in"
	B) during the production phase; when they are incurred
	C) after the production phase; after they are locked in
	D) after they are committed to during the budgeting phase

13) Managers are affected by risks they have to take and would prefer to use

actual rates for cost allocation because the rates are calculated from real amounts.
	B) actual rates for cost allocation because actual rates are easier to justify to users.
	C) budgeted rates for cost allocation because the rates are known in advance.
	D) budgeted rates for cost allocation because any variances are transferred to users.

24) Which of the following is true of long-run pricing?

A) It is fixed at a level that recovers the variable cost of the company and a pre-determined profit markup.
	B) It is generally a function of the market factors and the cost involved in production is generally not a consideration.
	C) It is a strategic decision designed to build long-run relationships with customers based on stable and predictable prices.
	D) It is based only on internal requirements like cost and estimated rate of return as in the long run these requirements are the driving factors of any organization.

Answer 1

	Explanation
3) Making design decisions is an example of managing costs:
A) during planning phase; before they are incurred but are "locked in"	The planning and design costs are incurred at the manufacturing stage, but they have already become locked- in at planning and design stage and its difficult to alter.
B) during the production phase; when they are incurred
C) after the production phase; after they are locked in
D) after they are committed to during the budgeting phase
13) Managers are affected by risks they have to take and would prefer to use
actual rates for cost allocation because the rates are calculated from real amounts.
B) actual rates for cost allocation because actual rates are easier to justify to users.
C) budgeted rates for cost allocation because the rates are known in advance.	For planning purposes, managers prefer to use budgeted rates for cost allocation because the rates are known in advance.
D) budgeted rates for cost allocation because any variances are transferred to users.
24) Which of the following is true of long-run pricing?
A) It is fixed at a level that recovers the variable cost of the company and a pre-determined profit markup.
B) It is generally a function of the market factors and the cost involved in production is generally not a consideration.
C) It is a strategic decision designed to build long-run relationships with customers based on stable and predictable prices.	Long-run pricing decision use prices that include a reasonable return on investment and help to build buyer-seller relationships
D) It is based only on internal requirements like cost and estimated rate of return as in the long run these requirements are the driving factors of any organization.