Monday, 7 September 2015

Top 20 Product costing Objective Type Questions And Answers

1. Which of the following statements regard life-cycle product costing and pricing is not correct?
A)The product life cycle covers the time from initial research and development to the time at which the product is first sold to customers.
B)Life-cycle costing tracks costs attributable to each product from start to finish.
C)A product life-cycle budget highlights for managers the importance of setting prices that will cover costs in all value-chain categories.
D)Life-cycle costing is becoming increasingly important in light of Take-Back Laws in Europe, which make the costs of recycling and disposal of products the responsibility of the manufacturer.
E)Life-cycle costs provide important information for pricing.
Ans: A

2. Which of the following statements regard life-cycle product costing and pricing is not correct?
A)The target price is the price based on customers' perceived value for the product and the price that competitors charge.
B)Target cost equals the target price plus the desired profit margin.
C)Target costing is the concept of "price-based costing" instead of "cost-based pricing."
D)Target costing is widely used by companies in the automobile, electronics, and the personal computer industries.
E)All of the above are correct statements.
Ans: B

3 .      The experience curve allows __________. [Hint]
A. A drop in the average per-unit production cost that comes with accumulated production experience
B. Experienced marketing managers to learn to anticipate consumer trends more effectively
C. Experienced consumers to wait for sales or promotions before buying a product
D. Managers to recognise the need for aggressive pricing strategies
Ans: A

4. What is value-based pricing? [Hint]
A. Offering just the right combination of quality and good service at a fair price
B. Companies set prices to break-even on production and marketing costs
C. Companies set prices to make a target profit and to get some value for their production and marketing efforts
D. Companies base their prices on buyers' perceptions of value, not their own costs
Ans: D

5. Pricing a product at a high initial price is called __________. [Hint]
A. A market-skimming strategy
B. Market development pricing
C. Market penetration pricing
D. Market conciliation pricing
Ans: A

6. Pricing products that must be used together with a main product is called ________ product pricing. [Hint]
A. Bundle
B. By-product
C. Captive
D. Optional
E. Product line pricing
Ans: C

7. Which one of the following would not be classified as a ‘long-term contract’ for costing purposes?
A. A furniture manufacturer producing 1000 leather sofas.
B. A road construction project.
C. A builder constructing a large office block.
D. A software company writing a tailor-made accounting package for a company. It is expected to take 18 months to complete.
Ans: A

8.  An ‘estimate’ is:
A. the final price of a job.
B. an estimate of cost given as a price guide to a customer.
C. the labour cost of a job, without any material costs included.
D. a record of the order placed by a customer.
Ans: B

9. A company gives a quotation for a job which requires 100 kg of materials @ £10 per kg, 25 direct labour hours @ £40 per hour and overheads recovered on the basis of kg used, at £8 per kg. A mark-up of 60% is added. What is the price chargeable to the customer?
A. £5,600.
B. £2,800.
C. £4,480.
Ans: C

10. Jumbly Ltd manufactures radiators in batches of 40. During May, Batch no. 23 had a slight manufacturing fault, resulting in only 36 radiators being completed. The 
remainder were scrapped. Costs were Raw materials £1,400, Labour and overheads £600. What was the cost per radiator?
A. £26.32.
B. £55.55.
C. £50.
D. £500.
Ans: B

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