Assume that a company manufactures numerous products, one of which is called Product A. The company has provided the following data regarding this product: $ Unit sales (a) Selling price per unit Variable cost per unit Contribution margin per unit (b) 120,000 20.00 12.00 8.00 $ Total contribution margin (a) * (b) Traceable fixed expenses Net operating income $960,000 920,000 $ 40,000 The company is considering increasing the price of Product A by 10%, from $20.00 to $22.00. The company estimates that this price hike will decrease unit sales by 15%, from 120,000 units to 102,000 units. What net operating income will Product A earn at a price of $22? Multiple Choice $70,000 O $100,000 O $80,000 O $(104,000) Assume that a company uses the absorption costing approach to cost-plus pricing. It is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: Number of units to be produced and sold each year Unit product cost Estimated annual selling and administrative expenses Estimated investment required by the company Desired return on investment (ROI) 15,000 $ 30 $ 63,900 $ 780,000 12 The selling price that the company would establish using a markup percentage on absorption cost is closest to: Multiple Choice es $42.50 $44.50 $35.50 a $40.50 Assume that a company uses the absorption costing approach to cost-plus pricing. It is considering the introduction of a new product that it hopes to produce and sell at a volume of 10,000 units per year. To determine a selling price, the company has gathered the following information: Direct materials per unit Direct labor unit Variable manufacturing overhead per unit Total fixed manufacturing overhead Markup percentage on absorption cost $11 $10 $ 2 $90,000 358 Using the absorption costing approach to cost-plus pricing, what selling price would the company establish for this product? Multiple Choice $33.20 $43.20 $3105 $41.05 Assume that a company has developed a new industrial component called Part A that offers superior performance relative to its competitors. The competing part sells for $1,500 and needs to be replaced after 1,500 hours of use. It also requires $400 of preventive maintenance during its useful life. Part A is similar to its competing product with two important exceptions-it needs to be replaced after 3,000 hours of use and it requires only $200 of preventive maintenance during its useful life. From a value-based pricing standpoint, what is the reference value that the company should consider when pricing Part A? Multiple Choice $3,000 $3,800 $1,900 $1,500
