Section C: Decision Analysis

Question 1

Margin of safety %

Answer 1

Margin of safety in units / Breakeven units

Question 2

Marginal Cost in terms of relevant decision making is defined as:

Answer 2

Change in total cost based on making the decision at hand

Question 3

Traditional pricing

Answer 3

price = cost + profit margin

Question 4

Target costing

Answer 4

Cost = competitive price in market - desired profit margin

Question 5

Cost-plus target pricing formula

Answer 5

Unit Cost * (1 + markup % unit) = Target selling price

Question 6

Price Elasticity of Demand is calculated

Answer 6

% Change in Qty / % Change in Price

Question 7

If price elasticity of demand is greater than 1, the product is considered

Answer 7

Elastic

Question 8

Left digit pricing design signifies:

Answer 8

An inexpensive product.

Question 9

When few good substitutes are available for a product, the price will be

Answer 9

Inelastic

Question 10

Monopolistic competition

Answer 10

Large number of sellers who work to produce and sell differentiated products

Question 11

Midpoint Method for Price Elasticity

Answer 11

(New QTY - Old QTY) / [(New QTY - Old Qty) / 2 ]
Divided by
(New Price - Old Price) / [(New Price - Old Price) / 2 ]