Answered: “All this marginal revenue and marginal…

“All this marginal revenue and marginal cost stuff is just theory. Prices are determined by production costs.” Evaluate this assertion.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter12: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 5SEQ

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Similar questions

In what sense is the WACC an average cost? A marginal cost?
Is this statement true or false? Can you please explain in detail. There is a difference between the theoretical production capacity and the actual output as demand fluctuates, resulting in differences in standardised cost price per unit
Explain the behavioral problem that can result when cost-plus prices are based on variable cost.
Discuss how non-production and production cost could affect the profitability
Which one of the following is not considered an assumption of cost-volume-profit analysis? a. Costs are linear b. Sales mix of products sold does not change c. Selling price per unit changes with volume d. Costs can be divided into variable and fixed components e. Fixed cost per unit is not constant
Selling price less estimated profit margin may be used to arrive at cost if this gives a reasonable approximation to actual cost.
Which of the followings is not correct about cost-based pricing? Select one: a. Total fixed costs change as the production amount changes. b. Total costs are the sum of total fixed and variable costs. c. Total variable costs increase due to a rise in production level. d. Variable costs per unit tend to be constant with respect to number of units produced.
Which of the following statements is CORRECT with respect to fixed costs per unit? Select one: A.They will decrease as production decreases. B.They will increase as production increases. C.They will increase as production decreases. D.They will remain the same as production levels change.
Which of the following statements is CORRECT with respect to fixed costs per unit? Select one: A. They will decrease as production decreases. B. They will remain the same as production levels change. C. They will increase as production increases. D. They will increase as production decreases.
Which one of the following is not an assumption of CVP analysis? The behavior of costs and revenues are linear within the relevant range. Sales mix remains constant. All units produced are sold. All costs are variable costs.
Cost-volume-profit analysis is used to make many decisions, including product pricing and controlling costs. Are these assumptions always valid?
Which of the following statements is true when making decisions using cost-volume-profit (CVP) analysis? Select one: a. As long as the contribution margin is a positive number, net income will be positive b. As long as variable costs are more than fixed costs, net income will be negative c. As long as the contribution margin is greater than fixed costs, net income will be positive d. As long as the sales price per unit is greater than fixed costs per unit, net income will be positive