Chapter 18

Question 1

Price elasticity of demand

Answer 1

the percentage change in quantity divided by the percentage change in price

Question 2

Perfectly competitive market

Answer 2

has many buyers and sellers no one of which is large enough to influence the market

Question 3

monopoly

Answer 3

barriers to entry are so high that there is only one firm in the market and the product is unique

Question 4

monopolistic competition

Answer 4

has characteristics of both monopoly and perfect competition, but it is much closer to the competitive situation

Question 5

oligopoly

Answer 5

characterized by a few sellers

Question 6

markup

Answer 6

a percentage applied to base cost

Question 7

target costing

Answer 7

sets the cost of a product or service based on the price that customers are willing to pay

Question 8

penetration pricing

Answer 8

the pricing of a new product at a low initial price, perhaps even lower than the cost, to build market share quickly

Question 9

price skimming

Answer 9

means that a higher price is charged when a product or service is first introduced

Question 10

price gouging

Answer 10

when firms with market power price products too high

Question 11

Predatory Pricing

Answer 11

the practice of setting prices below cost for the purpose of injuring competitors, also known as dumping

Question 12

Price discrimination

Answer 12

the charging of different prices to different customers for essentially the same product

Question 13

absorption costing

Answer 13

assigns all manufacturing costs, direct materials, direct labor, variable overhead, and a share of fixed overhead, to each unit of product
disadvantages: there is more room for manipulation

Question 14

variable costing

Answer 14

assigns only unit level variable manufacturing costs to the product; these include direct materials, direct labor, and variable overhead

Question 15

absorption vs variable

Answer 15

Production > Sales ABS>VC
Production < Sales ABS<VC
Production = Sales ABS=VC

Question 16

sales price variance

Answer 16

(actual price - expected price) * Quantity Sold

Question 17

sales volume variance

Answer 17

(actual volume - expected volume) * expected price

Question 18

contribution margin variance

Answer 18

the difference between actual and budgeted contribution margin
actual CM - budgeted CM

Question 19

contribution margin volume variance

Answer 19

(actual quantity sold - budgeted quantity sold) * budgeted average unit contribution margin

Question 20

budgeted average unit CM

Answer 20

total budgeted CM divided by the budgeted total number of units of all products to be sold

Question 21

sales mix variance

Answer 21

[(product 1 actual units - product 1 budgeted units) * (Product 1 budgeted CM-budgeted avg unit CM)]+[(Product 2 actual units - Product 2 budgeted units)*(Product 2 budgeted CM-Budgeted avg unit CM)]

Question 22

market share

Answer 22

gives the proportion of industry sales accounted for by a company.

Question 23

market size

Answer 23

the total revenue for the industry

Question 24

market share variance

Answer 24

[(Actual market share percentage - budgeted market share percentage)Actual industry sales in units]budgeted average unit CM

Question 25

product life cycle

Answer 25

the profit history of the product according to the four stages: 
intro
growth
maturity
decline