1. The pricing objective of maximizing profits: (Points: 5) has not been affected by other, more socially focused concerns. is to be implemented under any and all circumstances. has not always been considered the underlying objective of any pricing policy. must be considered when determining the price needed to increase market share.2. To stay in business, a company must have a selling price that is: (Points: 5) acceptable to the customer. able to recover the variable costs of production. the highest in the marketplace. equal to or lower than the company?s costs per unit.3. An internal issue to be considered when setting a price is: (Points: 5) whether the process is labor-intensive or automated. the customer?s preferences for quality versus price. current prices of competing products or services. the life of the product or service.4. An external issue to be considered when setting a price is: (Points: 5) the variable costs of the product or service. the desired rate of return. the quality of materials and labor. the number of competing products or services.5. Fixed costs that change for activity outside the relevant range would include: (Points: 5) supervision costs. electricity costs. production supplies costs. raw materials costs.6. When gross margin pricing is used, the markup percentage includes: (Points: 5) desired profits plus total selling, general, and administrative expenses. only the desired profit factor. total costs and expenses. desired profits plus total fixed production costs plus total selling, general, and administrative expenses.7. The return on assets pricing method: (Points: 5) has very little appeal and support. has a primary objective of earning a minimum rate of return on assets. is a crude approach to pricing and should be used as a last resort. replaces the desired rate of return used in cost-based pricing methods with a desired profit objective.8. The pricing method that establishes selling prices based on a stipulated rate above total production costs is: (Points: 5) return on assets pricing. target cost pricing. gross margin pricing. time and materials pricing.9. A major advantage of the target costing approach to pricing is that target costing: (Points: 5) allows a company to analyze the potential profit of a product before spending money to produce the product. is not dependent on customers? quality versus price decisions. identifies unproductive assets. anticipates the product?s profitability midway through its life cycle.10. Use of market transfer prices: (Points: 5) is the only acceptable approach in a free enterprise economy. usually does not cause the selling division to ignore negotiating attempts by the buying division. may cause an internal shortage of materials. usually does not work against the operating objectives of the company as a whole.11. The variables to be considered in the capital investment decision are: (Points: 5) expected life, estimated cash flow, and investment cost. expected life, estimated cost, and projected capital budget. estimated cash flow, investment cost, and corporate objectives. economic conditions, economic policies, and corporate objectives.12. Another term for the minimum rate of return is the: (Points: 5) payback rate. discounted rate. capital rate. hurdle rate.13. The after-tax amount is used for which of the following components of the cost of capital? (Points: 5) Cost of debt Cost of common stock Cost of preferred stock Cost of retained earnings14. Capital investment proposals should be ranked in decreasing order of: (Points: 5) length in years. dollar amount required. residual value expected. rate of return.15. Which of the following items is irrelevant to capital investment analysis? (Points: 5) Investment cost Residual value Carrying value Net cash flows16. The carrying value of a fixed asset is equal to its: (Points: 5) current disposal value. current replacement cost. original cost. undepreciated balance.17. Which of the following items can be described as a noncash expense? (Points: 5) Wages Advertising Income taxes Depreciation18. The time value of money concept is given consideration in long-range investment decisions by: (Points: 5) assuming equal annual cash flow patterns. assigning greater value to more immediate cash flows. weighting cash flows with subjective probabilities. investing only in short-term projects.19. The net present value method of evaluating proposed investments: (Points: 5) discounts cash flows at the minimum rate of return. ignores cash flows beyond the payback period. applies only to mutually exclusive investment proposals. measures a project?s time-adjusted rate of return.20. The payback period is defined as the amount of time in years for the sum of: (Points: 5) future net incomes to equal the original investment. net future cash inflows to equal the original investment. net present value of future cash inflows to equal the original investment. net future cash outflows to equal the original investment.
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