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Cost Accounting 101 Practice Test: Pricing Decisions and Cost Management
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The goal of pricing decisions is to set a price that maximizes profit. A simple pricing decision involves charging the same as competitors for similar products and services. A complex pricing decision involves: Understanding customers Knowing what competitors offer and charge Adjusting quickly to changes in markets, vendors, and customers  Companies that make simple pricing decisions often try to increase sales by making small adjustments, such as purchase discounts, volume discounts, and purchase allowances.    Cost management is the process of defining a project's budget and... Show more
Cost Accounting 101 Practice Test: Pricing Decisions and Cost Management
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25 Questions

1. To understand how competitors might price competing products, a company:
2. To comply with antitrust laws, a company must NOT engage in predatory pricing, dumping, or collusive pricing which lessen competition, put another company at a competitive disadvantage, or harm consumers.
3. Relevant costs of a bidding decision should EXCLUDE revenues lost on lower-priced sales to existing customers.
4. Long-run pricing:
5. The product life cycle spans the time from initial R&D on a product to when customer service and support is no longer offered for that product.
6. Profit margins are often set to earn a reasonable return on investment for short-term pricing decisions, but NOT long-term pricing decisions.
7. Short-run pricing decisions include adjusting product mix in a competitive environment.
8. Target costing begins with the price the customer is willing to pay and the backs-into" what the product should cost."
9. Relevant costs for pricing decisions include manufacturing costs, but NOT costs from other value-chain functions.
10. Too high a price may:
11. In some industries, such as legal and consulting, most costs are locked in:
12. Two different approaches to pricing decisions are market based and cost based.
13. The department usually in the best position to identify customers' needs is the:
14. A graph comparing locked-in costs with incurred costs will have:
15. Whether the firm uses the market-based approach or the cost-based approach for pricing decisions, the market forces must be considered.
16. Spending more on the design phase of a new product usually reduces subsequent product-related costs.
17. One goal of target costing is to keep costs below the target price.
18. All of the following are true regarding target costing EXCEPT:
19. Which one of the following activities would most likely be considered a long-run pricing decision?
20. All of the following are true regarding price discrimination EXCEPT that:
21. To design costs out of products is a goal of:
22. Value-added costs:
23. A product's markup percentage needs to cover operating profits when the cost base is:
24. Rework is an example of a value-added cost.
25. Customers are sometimes willing to pay for nonvalue-added costs.

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