Answered: Cost-volume-profit analysis is used to…

Cost-volume-profit analysis is used to make many decisions, including product pricing and controlling costs. Are these assumptions always valid?

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 9CDQ

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Concept explainers

Pricing

Pricing is used as a term in finance and economics, pricing is the process of fixing a value for a product or a service. Pricing establishes a value for a product or service that the customer has to pay. A business can choose from different strategies while deciding to set prices.

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Cost-volume-profit analysis is used to make many decisions, including product pricing and controlling costs. Are these assumptions always valid?

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Explain why changes in value-stream profitability may be better information than individual product cost for certain decisions.
Discuss how financial data prepared on the basis of variable costing can assist management in the development of short-run pricing policies.
What is meant by a products contribution margin ratio and how is this ratio useful in planning business operations?
For which cost concept used in applying (he cost-plus, approach to product pricing are fixed manufacturing costs, fixed selling and administrative expenses, and desired profit allowed for in determining the markup? A. Total cost B. Product cost C. Variable cost D. Standard cost
When might activity-based costing be preferred over using a relative amount of product sales in allocating selling and administrative expenses to products?
Why might management analyze product profitability?
What advantage does the FIFO cost method have over the average cost method relative to providing information for cost control?
Which statement is correct? A. Activity-based cost systems are less costly than traditional cost systems. B. Activity-based cost systems are easier to implement than traditional cost systems. C. Activity-based cost systems are more accurate than traditional cost systems. D. Activity-based cost systems provide the same data as traditional cost systems.