17.

a. b.

C. d. e.

Jennings Hardware store marks up all of its merchandise by 30%. It sells an item that costs Jennings $25, which of the following is true?

The price of the item is $7.50.

The markup on the item is $32.50.

The price of the item is $32.50.

The markup on the item is pure profit.

All of the above are true.

18. When a company faces a production constraint or scarce resource such as having only a certain amount of machine hours available for production activities, it is important to a. b. produce the product that has the highest contribution margin. produce the product with the lowest full manufacturing cost.

C. produce the products which yield the highest contribution margin per unit of scarce resource. produce the products that yield the lowest variable manufacturing cost.

e.

Scarce constraints are not relevant issues in determining the production mix of products.

19. In process costing, the cost of units finished in the last production department will be transferred from work in process to

1. Cost of goods sold.
2. Raw materials inventory.
3. Finished goods inventory.
4. Sales.
5. None of the answers above is correct.

20. a. b.

C.

d.

"Target Costing" is

a cost that a company "targets" to completely eliminate.

a method of determining the maximum amount of cost a product or service may be when considering the price customers are willing to pay and the desired profit margin of the company.

an approach that a company uses to assess the costs that key competitors achieve in making similar products in which the company competes. a process companies use to continuously drive down its costs.