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The pricing objective of maximizing profits: ...




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#7659 | Written in 18-Jul-2015

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