Indicate whether each statement is true (T) or false (F). ____1.The three major
ID: 2459968 • Letter: I
Question
Indicate whether each statement is true (T) or false (F). ____1.The three major influences on pricing decisions are customers, competitors, and costs. ____2.A company should accept a one-time-only special order when the order’s total contribution margin is positive. ____3.Value engineering is usually constrained by locked-in costs. ___4.The target rate of return on investment for a product is the same as the product’s markup as a percentage of its full unit cost. ___5.The cost of preparing an owner’s manual and including it in each product package is a value-added cost. ___6.One reason managers use the full cost of products as the cost base in their pricing decisions is to promote price stability. ___7.Life-cycle costing highlights manufacturing costs more than the costs of other business functions in the value chain. ___8.When there is price discrimination, pricing is not linked closely to the cost of the product. ___9.Under the U.S. Robinson-Patman Act, a manufacturing company cannot price discriminate between two customers if its intent is to lessen or prevent competition. ___10.Setting prices above average variable costs is regarded as pricing that is non-predatory. ___11.Collusive pricing occurs when a non-U.S. company sells a product in the U.S. at a price below the market value in the country where it is produced, and this lower price materially injures or threatens to materially injure an industry in the U.S.
Explanation / Answer
Answer to Question 1. True. The three major influences on pricing decisions are customers, competitors, and costs. These all determine what the price should be of the product. Type of customer, levelof competition, production determined the price.
Answer to Question 2. .False. A company should accept a one-time-only special order when the order’s total contribution margin is positive
Answer to Question 3. False. Value engineering is not a constraint by locked in cost. Value Engineering (VE) is concerned with new products. It is applied during product development.This is very significant,as many costs are locked in at the design development stage. This is understandable when you consider the design of any product determines many factors, such as tooling, plant and equipment, labour and skills etc
Answer to Question 4. False. The target rate of return on investment and the markup percentage are two different things.
Answer to Question 5. True. The cost of preparing an owner’s manual and including it in each product package is a value-added cost.