ADMS 1500 Chapter Notes - Chapter 9-11: Fixed Cost, Multiple Choice

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Part a (35 multiple choice questions mix of both calculation and conceptual) Co(cid:374)cept of a target cost whe(cid:374) the (cid:373)arket deter(cid:373)i(cid:374)es a product"s price. In a highly competitive market, price is largely determined by supply and demand. Concept of a target selling price using total cost-plus pricing. May have to set own price where there is little or no competition. Concept of a target selling price using absorption cost-plus pricing. Defines the cost base as the manufacturing cost. Both the variable and fixed selling and administrative costs are excluded from this cost base. Companies provide for selling and admin costs through markups. Concept a target selling price using variable cost-plus pricing. Calculate a target cost whe(cid:374) the (cid:373)arket deter(cid:373)i(cid:374)es a product"s price. Target cost = [market price] [desired profit] Calculate a target selling price using total cost-plus pricing. Target selling price = [cost] + [markup percentage x cost] Markup percentage = [desired roi per unit] [total unit cost]

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