Multiple Choice questions:

1) Which of the following is a major consideration when analyzing a special order?

A) The price must be high enough to cover any incremental costs to fill the order

B) The company must have a good stock turnover ratio

C) The profit margin of the special sale must be higher than the regular sales

D) The sunk costs of the decision must not exceed the irrelevant costs

2) If a company wishes to be a price-taker, which of the following strategies should they take?

A) Enter a competitive market and focus on cost cutting

B) Produce a unique product

C) Exploit the value of a fashionable brand name

D) Differentiate the product clearly from the competitors

3) Paragon Products sells a special kind of navigation equipment for $1,200. Variable costs are $900 per unit. When a special order arrived from a foreign contractor to buy 40 units at a reduced price of $1,000 per unit, there was a discussion among management. The controller said that as long as the special price was greater than the variable costs, the sale would contribute to the company's profits, and so it should be accepted as offered. The vice-president, however, decided to decline the order. Which of the following statements, if true, will support the decision of the vice-president?

A) The order is not likely to affect the regular sales.

B) The company is operating at 70% of its production capacity.

C) The variable costs of $900 include variable costs of packing the product.

D) The company will need to hire additional staff to execute this order.

4) Companies are price-takers when:

A) It is operating in a highly competitive market.

B) Its product is unique.

C) It has considerable flexibility in setting prices of its products.

D) It has very high fixed costs.

5) Which of the following statements is true?

A) Companies are price-takers when their products are unique.

B) Companies are price-setters for a product when there is intense competition.

C) Companies are price-takers for a product when pricing approach emphasizes cost-plus pricing.

D) Companies are price-takers when they have little or no control over the prices of their products or services.

Answer rating: 100% (QA)

1 A The price must be high enough to cover any incremental costs to fill th... View the full answer