ACCT 2122
CHAPTER 13A SAMPLE QUESTIONS (12/23/20)
The following questions were extracted from past exams. They are intended for you to become
familiar with the types and the formats of questions that you will be asked on the upcoming
exam. Studying ONLY these sample questions will not adequately prepare you for the exam. You
should also read the textbook and review the Connect problems and other problems that were
presented in class.
1. Ladle Corporation uses the absorption costing approach to cost-plus pricing described in the text to
set prices for its products. Based on budgeted sales of 63,000 units next year, the unit product cost
of a particular product is $39.00. The company's selling and administrative expenses for this
product are budgeted to be $1,020,600 in total for the year. The company has invested $560,000 in
this product and expects a return on investment of 11%.
The markup on absorption cost for this product would be closest to:
A. 12.0%
B. 41.5%
C. 52.5%
D. 44.0%
= (0.11 * 560,000) + 1,020,600 / (63,000 * 39)
= 1,082,200 / 2,457,000
= 44%
2. Inscho Corporation manufactures numerous products, one of which is called Delta10. The company
has provided the following data about this product:
Unit sales (a) 140,000
Selling price per unit $ 85.00
Variable cost per unit 53.00
Contribution margin per unit (b) $ 32.00
Total contribution margin (a) x (b)$4,480,000
Traceable fixed expense 4,030,000
Net operating income $ 450,000
Assume that the total traceable fixed expense does not change. How many units of product Delta10
would Inscho need to sell at a price of $90.95 to earn the same net operating income that it
currently earns at a price of $85.00? (Round your answer up to the nearest whole number.)
A. 125,938
B. 126,000
1
C. 118,051
D. 106,192
2
3. 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
4. Home Products, Inc., is planning the introduction of a new food dryer. To compete
effectively, the dryer would have to be priced at no more than $40 per unit. An
investment of $600,000 would have to be made in order to produce and sell the new
dryer. The company requires a return on investment of at least 25% on new products.
Assuming that the company expects to produce and sell 30,000 dryers per year, the
target cost per dryer would be closest to:
A. $18.00
B. $35.00
C. $20.00
D. $24.67
3
SUGGESTED ANSWERS
Quest Answer
ion
1 D
2 C
3 B
4 B
