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##### The pricing objective of maximizing profits

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**Question**

The pricing objective of maximizing profits;1 has not been affected by other, more socially focused concerns.;2 is to be implemented under any and all circumstances.;3 has not always been considered the underlying objective of any pricing policy.;4 must be considered when determining the price needed to increase market share.;To stay in business, a company must have a selling price that is;1 acceptable to the customer.;2 able to recover the variable costs of production.;3 the highest in the marketplace.;4 equal to or lower than the company's costs per unit.;An internal issue to be considered when setting a price is;1 whether the process is labor-intensive or automated.;2 the customer's preferences for quality versus price.;3 current prices of competing products or services.;4 the life of the product or service.;An external issue to be considered when setting a price is;1 the variable costs of the product or service.;2 the desired rate of return.;3 the quality of materials and labor.;4 the number of competing products or services.;Fixed costs that change for activity outside the relevant range would include;1 supervision costs.;2 electricity costs.;3 production supplies costs.;4 raw materials costs.;When gross margin pricing is used, the markup percentage includes;1 desired profits plus total selling, general, and administrative expenses.;2 only the desired profit factor.;3 total costs and expenses.;4 desired profits plus total fixed production costs plus total selling, general, and administrative expenses.;The return on assets pricing method;1 has very little appeal and support.;2 has a primary objective of earning a minimum rate of return on assets.;3 is a crude approach to pricing and should be used as a last resort.;4 replaces the desired rate of return used in cost-based pricing methods with a desired profit objective.;The pricing method that establishes selling prices based on a stipulated rate above total production costs is;1 return on assets pricing.;2 target cost pricing.;3 gross margin pricing.;4 time and materials pricing.;A major advantage of the target costing approach to pricing is that target costing;1 allows a company to analyze the potential profit of a product before spending money to produce the product.;2 is not dependent on customers' quality versus price decisions.;3 identifies unproductive assets.;4 anticipates the product's profitability midway through its life cycle.;Use of market transfer prices;1 is the only acceptable approach in a free enterprise economy.;2 usually does not cause the selling division to ignore negotiating attempts by the buying division.;3 may cause an internal shortage of materials.;4 usually does not work against the operating objectives of the company as a whole.;The variables to be considered in the capital investment decision are;1 expected life, estimated cash flow, and investment cost.;2 expected life, estimated cost, and projected capital budget.;3 estimated cash flow, investment cost, and corporate objectives.;4 economic conditions, economic policies, and corporate objectives.;Another term for the minimum rate of return is the;1 payback rate.;2 discounted rate.;3 capital rate.;4 hurdle rate.;The after-tax amount is used for which of the following components of the cost of capital?;1 Cost of debt;2 Cost of common stock;3 Cost of preferred stock;4 Cost of retained earnings;Capital investment proposals should be ranked in decreasing order of;1 length in years.;2 dollar amount required.;3 residual value expected.;4 rate of return.;Which of the following items is irrelevant to capital investment analysis?;1 Investment cost;2 Residual value;3 Carrying value;4 Net cash flows;The carrying value of a fixed asset is equal to its;1 current disposal value.;2 current replacement cost.;3 original cost.;4 undepreciated balance.;Which of the following items can be described as a noncash expense?;1 Wages;2 Advertising;3 Income taxes;4 Depreciation;The time value of money concept is given consideration in long-range investment decisions by;1 assuming equal annual cash flow patterns.;2 assigning greater value to more immediate cash flows.;3 weighting cash flows with subjective probabilities.;4 investing only in short-term projects.;The net present value method of evaluating proposed investments;1 discounts cash flows at the minimum rate of return.;2 ignores cash flows beyond the payback period.;3 applies only to mutually exclusive investment proposals.;4 measures a project's time-adjusted rate of return.;The payback period is defined as the amount of time in years for the sum of;1 future net incomes to equal the original investment.;2 net future cash inflows to equal the original investment.;3 net present value of future cash inflows to equal the original investment.;4 net future cash outflows to equal the original investment.

Paper#25359 | Written in 18-Jul-2015

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