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Exam_1.docx - Jack's Back Porch manufactures rustic furniture.showing page 1-2 out of 2

Jack's Back Porch manufactures rustic furniture. The cost accounting system estimates
manufacturing costs to be $270 per table, consisting of 80% variable costs and 20% fixed costs.
The company has surplus capacity available. It is Jack's Back Porch's policy to add a 60%
markup to full costs.
A large hotel chain is currently expanding and has decided to decorate all new hotels using the
rustic style. Jack's Back Porch is invited to submit a bid to the hotel chain. What per unit
price will Jack's Back Porch most likely bid on this long-term order?
A.
$345.60 per unit
B.
$86.40 per unit
C.
$162.00 per unit
D.
$432.00
per
unit
When target costing and target pricing are used together
.
A.
the
target
cost
is
the
estimated
long-run
cost
that enables a
product
or
service
to
achieve
a
desired profit
B. target costs are generally higher than current costs
C. the target cost is established first, then the target price
D. the focus of target pricing is to undercut the competition
Reverse engineering has the objective of reducing costs while still satisfying customer needs.
(T/F)
False
Gracius Manufacturing is approached by a European customer to fulfill a one-time-only special
order for a product similar to one offered to domestic customers. Gracius Manufacturing has a
policy of adding a 10% markup to full costs and currently has excess capacity. The following per
unit data apply for sales to regular customers:
Variable costs:
Direct materials
$90
Direct labor
30
Manufacturing overhead
40
Marketing costs
30
Fixed costs:
Manufacturing overhead
180
Marketing costs
10
Total costs
380
Markup (10% of total costs)
38
Estimated selling price
$418
For Gracius Manufacturing, what is the minimum acceptable price of this one-time-only
special order?
A. $160
B.
$190
C. $380
D. $120
Three major influences on pricing decisions are
.
A.
competition, demand, and production efficiency
B.
continuous improvement, customer satisfaction, and supply
C.
competition, costs,
and
customers
D. variable costs, fixed costs, and mixed costs
The amount of a markup percentage that customers are willing to pay is usually higher when
which of the following conditions exist?
A.
demand is elastic
B.
there is idle capacity
C.
demand
is strong
D. competition is intense