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Turnhilm, Inc. is considering adding a small electric mower to its product line. Management believes that in order to be competitive, the mower cannot be priced above $139. The company requires a minimum return of 25% on its investments. Launching the new product would require an investment of $8,000,000. Sales are expected to be 40,000 units of the mower per year. Required: Compute the target cost of a mower.

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Management of Niemczyk Corporation is considering a new product, an outdoor speaker that would have a selling price of $31 per unit and projected sales of 10,000 units. Launching the new product would require an investment of $700,000. The desired return on investment is 16%. Required: Determine the target cost per unit for the outdoor speaker.

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Morice Industries Inc. has developed a new injection mold, model IA-05, that is designed to offer superior performance to a comparable injection mold sold by Morice's main competitor. The competing injection mold sells for $54,000 and needs to be replaced after 1,000 hours of use. It also requires $7,000 of preventive maintenance during its useful life. Model IA-05's performance capabilities are similar to the competing product with two important exceptions-it needs to be replaced only after 2,000 hours of use and it requires $8,000 of preventive maintenance during its useful life. From a value-based pricing standpoint what range of possible prices should Morice consider when setting a price for model IA-05?


A) $54,000 ≤ Value-based price ≤ $114,000
B) $54,000 ≤ Value-based price ≤ $108,000
C) $60,000 ≤ Value-based price ≤ $114,000
D) $60,000 ≤ Value-based price ≤ $108,000

E) B) and D)
F) All of the above

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Spach Corporation manufactures numerous products, one of which is called Beta-68. The company has provided the following data about this product: Spach Corporation manufactures numerous products, one of which is called Beta-68. The company has provided the following data about this product: Assume that the total traceable fixed expense does not change. How many units of product Beta-68 would Spach need to sell at a price of $15.20 to earn the same net operating income that it currently earns at a price of $16.00? (Round your answer up to the nearest whole number.) A) 126,924 B) 111,538 C) 96,667 D) 121,000 Assume that the total traceable fixed expense does not change. How many units of product Beta-68 would Spach need to sell at a price of $15.20 to earn the same net operating income that it currently earns at a price of $16.00? (Round your answer up to the nearest whole number.)


A) 126,924
B) 111,538
C) 96,667
D) 121,000

E) B) and C)
F) A) and D)

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Conaghan Avionics Corporation has developed a new high pressure pump-model RA-79-that has been designed to outperform a competitor's best-selling high pressure pump. The competitor's product has a useful life of 30,000 hours of service, has operating costs that average $3.60 per hour, and sells for $159,000. In contrast, model RA-79 has a useful life of 60,000 hours of service and its operating cost is $2.00 per hour. Conaghan has not yet established a selling price for model RA-79. From a value-based pricing standpoint what is RA-79's economic value to the customer over its 60,000 hour useful life?


A) $414,000
B) $267,000
C) $255,000
D) $279,000

E) None of the above
F) A) and B)

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Thoen Heavy Machinery Corporation has developed a new drill press-model OU-84-that has been designed to outperform a competitor's best-selling drill press. The competitor's product has a useful life of 30,000 hours of service, has operating costs that average $1.60 per hour, and sells for $189,000. In contrast, model OU-84 has a useful life of 120,000 hours of service and its operating cost is $1.00 per hour. Thoen has not yet established a selling price for model OU-84. Required: From a value-based pricing standpoint what range of possible prices should Thoen consider when setting a price for model OU-84?

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Tavis Robotics Corporation has developed a new robot-model FI-73-that has been designed to out perform a competitor's best-selling robot. The competitor's product has a useful life of 10,000 hours of service, has operating costs that average $4.60 per hour, and sells for $109,000. In contrast, model FI-73 has a useful life of 30,000 hours of service and its operating cost is $2.60 per hour. Tavis has not yet established a selling price for model FI-73. From a value-based pricing standpoint what is FI-73's economic value to the customer over its 30,000 hour useful life?


A) $155,000
B) $278,000
C) $387,000
D) $187,000

E) A) and D)
F) All of the above

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Boggess Corporation manufactures numerous products, one of which is called Alpha41. The company has provided the following data about this product: Boggess Corporation manufactures numerous products, one of which is called Alpha41. The company has provided the following data about this product: Management is considering increasing the price of Alpha41 by 10%, from $86.00 to $94.60. The company's marketing managers estimate that this price hike would decrease unit sales by 20%, from 120,000 units to 96,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will product Alpha41 earn at a price of $94.60 if this sales forecast is correct? A) $459,600 B) $4,512,000 C) $3,609,600 D) $1,362,00 Management is considering increasing the price of Alpha41 by 10%, from $86.00 to $94.60. The company's marketing managers estimate that this price hike would decrease unit sales by 20%, from 120,000 units to 96,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will product Alpha41 earn at a price of $94.60 if this sales forecast is correct?


A) $459,600
B) $4,512,000
C) $3,609,600
D) $1,362,00

E) A) and B)
F) A) and C)

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Starowicz Corporation manufactures numerous products, one of which is called Beta10. The company has provided the following data about this product: Starowicz Corporation manufactures numerous products, one of which is called Beta10. The company has provided the following data about this product: Management is considering decreasing the price of Beta10 by 7%, from $12.00 to $11.16. The company's marketing managers estimate that this price reduction would increase unit sales by 15%, from 120,000 units to 138,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will product Beta-10 earn at a price of $11.16 if this sales forecast is correct? A) −$40,800 B) $16,080 C) $379,200 D) $436,080 Management is considering decreasing the price of Beta10 by 7%, from $12.00 to $11.16. The company's marketing managers estimate that this price reduction would increase unit sales by 15%, from 120,000 units to 138,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will product Beta-10 earn at a price of $11.16 if this sales forecast is correct?


A) −$40,800
B) $16,080
C) $379,200
D) $436,080

E) A) and D)
F) A) and B)

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Contento Corporation manufactures numerous products, one of which is called Kappa15. The company has provided the following data about this product: Contento Corporation manufactures numerous products, one of which is called Kappa15. The company has provided the following data about this product: What is the net operating income for product Kappa15 at the current price? A) $4,800,000 B) $13,600,000 C) $260,000 D) $9,060,000 What is the net operating income for product Kappa15 at the current price?


A) $4,800,000
B) $13,600,000
C) $260,000
D) $9,060,000

E) None of the above
F) A) and D)

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Blauvelt Electronics Corporation has developed a new instrument-model GZ-29-that has been designed to outperform a competitor's best-selling instrument. Model GZ-29 has a useful life of 30,000 hours of service and its operating cost is $3.20 per hour.In contrast, the competitor's product has a useful life of 10,000 hours of service and has operating costs that average $5.60 per hour. The competitor's instrument sells for $149,000. Blauvelt has not yet established a selling price for model GZ-29. From a value-based pricing standpoint what is the differentiation value offered by GZ-29 relative to the competitor's offering for each 30,000 hours of service?


A) $245,000
B) $205,000
C) $72,000
D) $370,000

E) A) and C)
F) B) and C)

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In value-based pricing, the value of what differentiates a product from the best available alternative is known as the differentiation value.

A) True
B) False

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Napp Heavy Machinery Corporation has developed a new drill press-model GJ-37-that has been designed to outperform a competitor's best-selling drill press. The competitor's product has a useful life of 30,000 hours of service, has operating costs that average $1.70 per hour, and sells for $169,000. In contrast, model GJ-37 has a useful life of 120,000 hours of service and its operating cost is $1.10 per hour. Napp has not yet established a selling price for model GJ-37. From a value-based pricing standpoint what range of possible prices should Napp consider when setting a price for GJ-37?


A) $579,000 ≤ Value-based price ≤ $748,000
B) $169,000 ≤ Value-based price ≤ $748,000
C) $301,000 ≤ Value-based price ≤ $579,000
D) $169,000 ≤ Value-based price ≤ $301,000

E) C) and D)
F) None of the above

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Herrell Corporation manufactures numerous products, one of which is called Delta11. The company has provided the following data about this product: Herrell Corporation manufactures numerous products, one of which is called Delta11. The company has provided the following data about this product: Management is considering increasing the price of Delta11 by 5%, from $29.00 to $30.45. The company's marketing managers estimate that this price hike would decrease unit sales by 10%, from 110,000 units to 99,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will product Delta11 earn at a price of $30.45 if this sales forecast is correct? A) $1,133,550 B) $123,550 C) $249,500 D) $1,259,500 Management is considering increasing the price of Delta11 by 5%, from $29.00 to $30.45. The company's marketing managers estimate that this price hike would decrease unit sales by 10%, from 110,000 units to 99,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will product Delta11 earn at a price of $30.45 if this sales forecast is correct?


A) $1,133,550
B) $123,550
C) $249,500
D) $1,259,500

E) B) and D)
F) A) and C)

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The management of Musselman Corporation would like to set the selling price on a new product using the absorption costing approach to cost-plus pricing. The company's accounting department has supplied the following estimates for the new product: The management of Musselman Corporation would like to set the selling price on a new product using the absorption costing approach to cost-plus pricing. The company's accounting department has supplied the following estimates for the new product: Management plans to produce and sell 9,000 units of the new product annually. The new product would require an investment of $1,305,000 and has a required return on investment of 10%. The unit target selling price using the absorption costing approach is closest to: A) $115.00 B) $86.50 C) $100.50 D) $83.33 Management plans to produce and sell 9,000 units of the new product annually. The new product would require an investment of $1,305,000 and has a required return on investment of 10%. The unit target selling price using the absorption costing approach is closest to:


A) $115.00
B) $86.50
C) $100.50
D) $83.33

E) B) and D)
F) None of the above

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Ohanlon Corporation manufactures numerous products, one of which is called Delta27. The company has provided the following data about this product: Ohanlon Corporation manufactures numerous products, one of which is called Delta27. The company has provided the following data about this product: Required: a. Management is considering increasing the price of Delta27 by 5%, from $62.00 to $65.10. The company's marketing managers estimate that this price hike would decrease unit sales by 10%, from 180,000 units to 162,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will Delta27 earn at a price of $65.10 if this sales forecast is correct? b. Assuming that the total traceable fixed expense does not change, if Ohanlon increases the price of Delta27 to $65.10, what percentage change in unit sales would provide the same net operating income that it currently earns at a price of $62.00? (Round your answer to the nearest one-tenth of a percent.) Required: a. Management is considering increasing the price of Delta27 by 5%, from $62.00 to $65.10. The company's marketing managers estimate that this price hike would decrease unit sales by 10%, from 180,000 units to 162,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will Delta27 earn at a price of $65.10 if this sales forecast is correct? b. Assuming that the total traceable fixed expense does not change, if Ohanlon increases the price of Delta27 to $65.10, what percentage change in unit sales would provide the same net operating income that it currently earns at a price of $62.00? (Round your answer to the nearest one-tenth of a percent.)

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a. The profit at the price of $65.10 per...

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Willow Corporation manufactures and sells 20,000 units of Product Z each year. In order to produce and sell this many units, it has been necessary for the company to make an investment of $500,000 in Product Z. The company requires a 20% rate of return on all investments in products. Selling and administrative expenses associated with Product Z total $200,000 per year. The unit product cost of Product Z is $20. The company uses the absorption costing approach to cost-plus pricing described in the text. The selling price for Product Z is:


A) $25
B) $30
C) $35
D) $40

E) All of the above
F) A) and B)

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Tavis Robotics Corporation has developed a new robot-model FI-73-that has been designed to outperform a competitor's best-selling robot. The competitor's product has a useful life of 10,000 hours of service, has operating costs that average $4.60 per hour, and sells for $109,000. In contrast, model FI-73 has a useful life of 30,000 hours of service and its operating cost is $2.60 per hour. Tavis has not yet established a selling price for model FI-73. From a value-based pricing standpoint what range of possible prices should Tavis consider when setting a price for FI-73?


A) $187,000 ≤ Value-based price ≤ $278,000
B) $109,000 ≤ Value-based price ≤ $187,000
C) $109,000 ≤ Value-based price ≤ $387,000
D) $278,000 ≤ Value-based price ≤ $387,000

E) C) and D)
F) All of the above

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Weitman Corporation manufactures numerous products, one of which is called Epsilon-50. The company has provided the following data about this product: Weitman Corporation manufactures numerous products, one of which is called Epsilon-50. The company has provided the following data about this product: Assume that the total traceable fixed expense does not change. How many units of product Epsilon-50 would Weitman need to sell at a price of $31.61 to earn the same net operating income that it currently earns at a price of $29.00? (Round your answer up to the nearest whole number.) A) 105,070 B) 116,364 C) 110,500 D) 94,048 Assume that the total traceable fixed expense does not change. How many units of product Epsilon-50 would Weitman need to sell at a price of $31.61 to earn the same net operating income that it currently earns at a price of $29.00? (Round your answer up to the nearest whole number.)


A) 105,070
B) 116,364
C) 110,500
D) 94,048

E) None of the above
F) B) and C)

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Minden Corporation estimates that the following costs and activity would be associated with the manufacture and sale of product A: Minden Corporation estimates that the following costs and activity would be associated with the manufacture and sale of product A: If the company uses the absorption costing approach to cost-plus pricing described in the text and desires a 15% rate of return on investment (ROI) , the required markup on absorption cost for Product A would be closest to: A) 12% B) 15% C) 60% D) 72% If the company uses the absorption costing approach to cost-plus pricing described in the text and desires a 15% rate of return on investment (ROI) , the required markup on absorption cost for Product A would be closest to:


A) 12%
B) 15%
C) 60%
D) 72%

E) A) and D)
F) All of the above

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