[Chapter 2] Pricing and Profitability Analysis TB Flashcards
Which of the following is NOT an example of a market structure?
A. oligopoly
B. monopoly
C. barrier market
D. perfectly competitive
barrier market
Which type of expenses does a monopoly usually incur that are different from the other types of market structures?
A. marketing costs such as advertising, positioning, discounting, and coupons
B. costs of differentiation such as advertising, rebates, coupons
C. no special expenses
D. legal and lobbying expenditures
legal and lobbying expenditures
Which of the following is true regarding expenses related to specific market structure types?
A. Monopolistic competition and oligopolies are the only structures where costs of differentiation have an impact.
B. Both monopolies and monopolistic competition structures normally must expend legal and lobbying costs.
C. In perfect competition and monopolistic competition, differentiation costs have an impact.
D. In perfect competition and oligopolies, there are no special expenses related to the structure of the organization.
Monopolistic competition and oligopolies are the only structures where costs of differentiation have an impact.
Monopolistic competition is best defined as
A. a structure that has many buyers and sellers, but the products are differentiated on some basis.
B. a structure where customers are willing to pay a little more for the unique feature that appeals to them.
C. a structure that combines perfect competition and monopoly, but is closer to a competitive situation.
D. all of these.
A. a structure that has many buyers and sellers, but the products are differentiated on some basis.
B. a structure where customers are willing to pay a little more for the unique feature that appeals to them.
C. a structure that combines perfect competition and monopoly, but is closer to a competitive situation.
What is the slope of the demand curve?
Downward sloping
What is the slope of the supply curve?
Upward sloping
Which of the following markets is characterized by the following: many buyers and sellers, a homogeneous product, easy entry into and exit from the industry, and all firms are price takers?
A. perfectly competitive market
B. monopolistic competition
C. monopoly
D. oligopoly
perfectly competitive market
Which of the following markets is characterized by the following: only a few firms in the industry, a fairly unique product, difficult entry into the industry, and spending for differentiation of the product?
A. perfectly competitive market
B. monopolistic competition
C. monopoly
D. oligopoly
oligopoly
Which of the following markets is characterized by the following: many firms in the industry, a somewhat unique product, fairly easy entry into the industry, and spending for differentiation of the product?
A. perfectly competitive market
B. monopolistic competition
C. monopoly
D. oligopoly
monopolistic competition
Which of the following markets is characterized by the following: a single firm in the industry, a unique product, and difficult entry into the industry?
A. perfectly competitive market
B. monopolistic competition
C. monopoly
D. oligopoly
monopoly
Which of the following statements is FALSE?
A. The markup is a percentage applied to base cost.
B. The markup is an absolute rule.
C. A major advantage of markup pricing is that standard markups are easy to apply.
D. The markup can be calculated using a variety of bases
The markup is an absolute rule.
Which of the following is a FALSE statement about target costing?
A. Target costing is a method of determining the cost of a product or service based on the price that customers are willing to pay.
B. The cost is calculated by subtracting the desired profit from the target price.
C. Target costing is an interactive process.
D. Target costing is cost driven
Target costing is cost driven
Price skimming occurs in which of the following life-cycle stages?
A. Introduction
B. Growth
C. Maturity
D. Decline
Introduction
_______________ is the pricing of a new product at a low initial price to build market share quickly.
A. Penetration pricing
B. Predatory pricing
C. Price skimming
D. Target costing
Penetration pricing
_______________ is where a higher price is charged at the beginning of a product’s life cycle.
A. Penetration pricing
B. Predatory pricing
C. Price skimming
D. Target costing
Price skimming
_______________ is said to occur when firms with market power price products “too high.”
A. Predatory prices
B. Price discrimination
C. Price gouging
D. Penetration pricin
Price gouging
After the 2006 tornado in Oklahoma City, OK, businesses were trying to sell lumber for 50 percent above their regular prices. This is an example of
A. predatory prices.
B. price discrimination.
C. price gouging.
D. penetration pricing.
price gouging
___________ refers to charging different prices to different customers for essentially the same product.
A. Gouging
B. Price discrimination
C. Skimming
D. Penetration pricing
Price discrimination
The Robinson-Patman Act allows price discrimination under which of the following circumstances?
A. if revenues justify it
B. if the competitive situation demands it
C. if the costs remain the same for all customers
D. The Robinson-Patman Act does not allow price discrimination under any situation.
if the competitive situation demands it
_______________ on the international market is called dumping.
A. Price discrimination
B. Predatory pricing
C. Price skimming
D. Penetration pricing
Predatory pricing
A disadvantage of absorption costing is
A. that it is not a useful format for decision making.
B. that it might encourage inventory build up.
C. both a and b.
D. none of these.
A. that it is not a useful format for decision making.
B. that it might encourage inventory build up.
Gross margin is to absorption costing as _______________ is to variable costing.
A. gross profit
B. contribution margin
C. net income
D. territory margin
contribution margin
When monthly production volume is constant and sales volume is less than production, net income determined with variable costing procedures will
A. always be greater than net income determined using absorption costing.
B. always be less than net income determined using absorption costing.
C. be equal to net income determined using absorption costing.
D. be equal to contribution margin per unit times units sold
always be less than net income determined using absorption costing.
When production is less than sales volume, net income under absorption costing will be _______________ profits using variable costing procedures.
A. greater than
B. less than
C. equal to
D. randomly different than
less than
Inventory values calculated using variable costing as opposed to absorption costing will generally be
A. equal.
B. less.
C. greater.
D. twice as much.
less.
Which of the following statements is TRUE?
A. Absorption costing net income exceeds variable costing net income when units produced and sold are equal.
B. Variable costing net income exceeds absorption costing net income when units produced exceed units sold.
C. Absorption costing net income exceeds variable costing net income when units produced are less than units sold.
D. Absorption costing net income exceeds variable costing net income when units produced are greater than units sold
Absorption costing net income exceeds variable costing net income when units produced are greater than units sold
All of the following costs are included in inventory under absorption costing EXCEPT
A. direct materials.
B. direct labor.
C. fixed selling expenses.
D. fixed factory overhead.
fixed selling expenses.
What is the primary difference between variable and absorption costing?
A. inclusion of fixed selling expenses in product costs
B. inclusion of variable factory overhead in period costs
C. inclusion of fixed selling expenses in period costs
D. inclusion of fixed factory overhead in product cost
inclusion of fixed factory overhead in product cost
Which of the following could be considered a segment?
A. division
B. product-line
C. sales territory
D. all of these
A. division
B. product-line
C. sales territory
The sales price variance is created by a difference between:
A. actual and standard contribution margin.
B. actual and expected sales price.
C. expected and standard net income.
D. actual and expected sales volume
actual and expected sales price.
The market share variance is calculated by:
A. [(Actual industry sales in units – Budgeted industry sales in units) ´ (Budgeted market share percentage)] ´ (Budgeted average unit contribution margin).
B. [(Actual market share percentage – Budgeted market share percentage) ´ (Actual industry sales in units)] ´ (Budgeted average unit contribution margin).
C. (Actual quantity sold – Budgeted quantity sold) ´ Budgeted average unit contribution margin.
D. (Actual quantity sold – Budgeted quantity sold) ´ Actual average unit contribution margin.
[(Actual market share percentage – Budgeted market share percentage) ´ (Actual industry sales in units)] ´ (Budgeted average unit contribution margin).
According to Hansen and Mowen, which of the following stages comes first?
A. Introduction
B. Growth
C. Development
D. Decline
Development
Which of the following stages is characterized by rapid increases in sales and production?
A. Introduction
B. Growth
C. Maturity
D. Decline
Growth
Which of the following stages has revenues for the entire industry decreasing?
A. Introduction
B. Growth
C. Maturity
D. Decline
Decline
The majority of the product cost is “locked in” during which of the following life-cycle stages?
A. Introduction
B. Growth
C. Development
D. Decline
Development
Which of the following is NOT a limitation of profit management?
A. the emphasis on quantifiable measures
B. emphasis on volume variances
C. the focus on past performance
D. a higher emphasis on short-run optimization
emphasis on volume variances
An alternative to the limitation of focusing on profits would be
A. communicating other measures are important but continue to base rewards on profits.
B. overstate the value of ending inventory in order to reduce cost of goods sold and improve operating income
performance.
C. focus on long-term objectives and appropriate emphasis on profit.
D. analyze the product mix
focus on long-term objectives and appropriate emphasis on profit.
What are the ways employee behavior changes in relation to a profit emphasis?
A. desire to avoid losses may result in short-run decisions
B. unethical behavior may take place if rewards or bonuses are based on profits
C. ignoring the less measurable outcomes that may benefit the company
D. all of these are potential changes
A. desire to avoid losses may result in short-run decisions
B. unethical behavior may take place if rewards or bonuses are based on profits
C. ignoring the less measurable outcomes that may benefit the company
A successful firm:
A. places appropriate emphasis on profit, is aware of economic and environmental trends outside the company, and measures impact on the community and employees.
B. values numeric profit and encourage employees to do what is in their power to increase profits.
C. ensures there are always monthly, quarterly, and annual profit and lost statements as the sole measure of
success so that all employees are aware of the success or failure of a period.
D. none of thes
places appropriate emphasis on profit, is aware of economic and environmental trends outside the company, and measures impact on the community and employees.
