Question 1

Which of the following is NOT a major influence on pricing decisions according to the study materials?

Accepted Answer

Government regulations

Question 2

IKEA’s strategy of shipping products unassembled in flat packages primarily aims to:

Accepted Answer

Reduce shipping costs by a factor of six compared to assembled products

Question 3

Astel Computers is considering a short-run pricing decision for a one-time order. What is the relevant cost per computer if direct materials are $$460, direct labor is 64$$, and fixed costs for the order are $250,000 for 5,000 computers?

Accepted Answer

$574

Question 4

Which pricing strategy is based on what customers are willing to pay?

Accepted Answer

Target pricing

Question 5

If Astel Computers bids $$610 per computer for a 5,000-unit order, what is the expected operating income from this deal, given relevant costs of 2$$,870,000?

Accepted Answer

$180,000

Question 6

Which of the following best describes the effect of time horizon on pricing decisions?

Accepted Answer

Long-run pricing considers all future variable and fixed costs to achieve a target return on investment

Question 7

In a competitive market, which pricing approach is most likely to be used for commodity products?

Accepted Answer

Market-based pricing

Question 8

Which of the following is a key reason why IKEA surveys competitor prices before setting its own target price for new products?

Accepted Answer

To set target prices 30% to 50% lower than competitors and maintain cost efficiency

Question 9

Which formula correctly calculates the relevant cost per unit for a special order, given total relevant costs $$C$$ and quantity $$Q$$?

Accepted Answer

$$\frac{C}{Q}$$

Question 10

When making short-run pricing decisions, which costs are typically considered relevant?

Accepted Answer

Both direct and indirect costs that will change due to the decision

Question 11

Which market condition allows multinational corporations to leverage excess capacity and sell products at different prices in different countries?

Accepted Answer

Multinational operations

Question 12

If a company wants to maximize income in the short run during periods of strong demand and limited capacity, what is the most likely pricing action?

Accepted Answer

Increase prices to what the market will bear

Question 13

Which of the following is TRUE about cost-plus pricing?

Accepted Answer

It adds a target profit percentage to the full product cost

Question 14

Astel Computers faces a one-time order for 5,000 units. If the relevant cost per unit is $$574 and the company bids 610 $$per unit, what is the total expected profit from the order?

Accepted Answer

$180,000

Question 15

Which of the following best describes the opportunistic nature of short-run pricing?

Accepted Answer

Prices are adjusted based on current demand and competition

Question 16

If a company’s relevant costs for a special order are $$2,870,000 and the relevant revenue is 3$$,050,000, what is the contribution margin?

Accepted Answer

$180,000

Question 17

Which of the following is a reason why some costs may NOT be relevant in short-run pricing decisions?

Accepted Answer

They do not change whether the company wins or loses the special business deal

Question 18

Which pricing strategy includes environmental costs of production, reclamation, recycling, and reuse?

Accepted Answer

Life-cycle pricing

Question 19

When selecting store locations, IKEA considers all of the following EXCEPT:

Accepted Answer

Competitor’s profit margins

Question 20

Which of the following is the correct formula for calculating relevant revenue for a special order, given price per unit $$P$$ and quantity $$Q$$?

Accepted Answer

$$P 	imes Q$$

Strategic Pricing and Cost Management in Financial Accounting

Study Guide - Practice Questions

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