Management Accounting - Study Mode
[#256] Product costing technique in which markup component is added into cost base, to set a target price is known as
Correct Answer
(C) cost plus pricing
Explanation
Solution: Product costing technique in which markup component is added into cost base, to set a target price is known as cost plus pricing. Product costing methods are used to assign a cost to a manufactured product.
[#257] If invested capital is $150000 and target rate of return on investment is 16%, then target annual operating income would be
Correct Answer
(C) $24,000
Explanation
Solution: Target annual operating income = Invested capital × Target rate of return on investment = $150000 × 16% = $24,000.
[#258] In cost-plus pricing, 'plus' refers to a component named as
Correct Answer
(B) markup
Explanation
Solution: In cost-plus pricing, 'plus' refers to a component named as markup. Cost-plus pricing, also called markup pricing, is the practice by a company of determining the cost of the product to the company and then adding a percentage on top of that price to determine the selling price to the customer.
[#259] Span time from initial research and development of product till support and customer service, if not offered for that particular product will be called
Correct Answer
(A) product life cycle
Explanation
Solution: Span time from initial research and development of product till support and customer service, if not offered for that particular product will be called product life cycle. This concept is used by management and by marketing professionals as a factor in deciding when it is appropriate to increase advertising, reduce prices, expand to new markets, or redesign packaging.
[#260] Kind of costs that has been occurred in past are also known as
Correct Answer
(C) sunk costs
Explanation
Solution: Kind of costs that has been occurred in past are also known as sunk costs. A sunk cost is a cost that an entity has incurred, and which it can no longer recover. Sunk costs should not be considered when making the decision to continue investing in an ongoing project, since these costs cannot be recovered.