Question

95.

The target cost is determined by taking

a.the expected selling price and adding desired profit

b.the expected selling price and subtracting the desired profit

c.the expected selling price and subtracting the budgeted standard cost

d.the budgeted standard cost and reducing it by 10%

94.

Using the variable cost method, determine the selling price (rounded to the nearest dollar) for 30,000 units using the following data:

Variable cost per unit	$15
Total fixed costs	$90,000
Desired profit	$150,000

a.$23

b.$10

c.$15

d.$8

93.

Swan Company produces its product at a total cost of $43 per unit. Of this amount, $8 per unit is selling and administrative costs. The total variable cost is $30 per unit, and the desired profit is $20 per unit.

The markup percentage on product cost is

a.80%

b.70%

c.110%

d.47%

92.

Flyer Company sells a product in a competitive marketplace. Market analysis indicates that its product would probably sell at $48 per unit. Flyer management desires a 12.5% profit margin on sales. Flyer's current full cost for the product is $44 per unit.

In order to meet the new target cost, how much will the company have to cut costs per unit, if any?

a.$1

b.$0

c.$3

d.$2

91.

Flyer Company sells a product in a competitive marketplace. Market analysis indicates that its product would probably sell at $48 per unit. Flyer management desires a 12.5% profit margin on sales. Flyer's current full cost for the product is $44 per unit.

The desired profit per unit is

a.$8

b.$5

c.$6

d.$4

90.

Mallard Corporation uses the product cost method of product pricing. Below is cost information for the production and sale of 45,000 units of its sole product. Mallard desires a profit equal to a 12% return on invested assets of $800,000.

Fixed factory overhead cost	$82,000
Fixed selling and administrative costs	45,000
Variable direct materials cost per unit	5.50
Variable direct labor cost per unit	7.65
Variable factory overhead cost per unit	2.25
Variable selling and administrative cost per unit	0.90

The unit selling price for the company's product is

a.$15.75

b.$19.35

c.$22.05

d.$21.25

89. v

Mallard Corporation uses the product cost method of product pricing. Below is cost information for the production and sale of 45,000 units of its sole product. Mallard desires a profit equal to a 12% return on invested assets of $800,000.

Fixed factory overhead cost	$82,000
Fixed selling and administrative costs	45,000
Variable direct materials cost per unit	5.50
Variable direct labor cost per unit	7.65
Variable factory overhead cost per unit	2.25
Variable selling and administrative cost per unit	0.90

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

a.$13.15

b.$15.40

c.$15.75

d.$17.22

88.

The target costing method assumes that

a.markup is added to total cost

b.the selling price is set by the marketplace

c.markup is added to product cost

d.markup is added to variable cost

87.

Which of the following methods of applying the cost-plus approach to product pricing includes selling expenses, administrative expenses, and desired profit in the markup?

a.demand-based method

b.variable cost method

c.product cost method

d.total cost method

86.

Which of the following is not a method commonly used in applying the cost-plus approach to product pricing?

a.product cost method

b.total cost method

c.fixed cost method

d.variable cost method

Answer 1

95. Option b is correct. Target cost can be determined by subtracting a desired profit margin from market selling price.

94. Option a is correct. Selling Price = Variable cost + Fixed cost + profit ( per unit )

Variable cost per unit = 15, fixed cost per unit = 90,000 / 30,000 = 3 and desired profit = 150,000 / 30,000 = 5

Selling price = 15+3+5 = $23.

93. Option d is correct. Markup % = ( Desired profit * 100) / Total cost.

Markup % = ( $ 20 * 100 ) / $43 = 46.5%.

92. Option d is correct. Market selling price * desired prfit margin i.e., 48*12.5% = 6

target cut cost should be 6 - 4 = $2.

91. Option d is correct. Market selling price = $48 per unit, cost price = $44 per unit, profit = 48 - 44 = $4.