Page 301 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes 14.9 Review Questions

1. “Pricing plays a very important role in the marketing strategy of a firm and a significant
one in the overall success.” Evaluate the statement.

2. Transfer prices are the amounts charged by one segment of an organization for a product
or service that it supplies to another segment of the same organization. Define.
3. The aim of the fixer of prices is to sell the present and future capacity for the greatest
obtainable contribution. Discuss.
4. Illustrate full cost pricing with a suitable example.
5. If Fixed Cost $25,000, Variable cost $2.00 per unit, Number of Units produced 4,000 and
Mark-up is 15% on the break-even price, what will be selling price to the customers?
6. Setting of transfer pricing policies within the company is of great significance. Why?
7. Discuss the concept of Goal congruence.

8. From the details given below calculate minimum price of product X:
Material $3.50
Labor (2 hrs. @ $3.00) $5.00

Variable production overhead $2.50
Fixed production overhead $1.20
Total $9.70
9. What is the significance of using odd pricing strategies? Give some suitable examples.
10. Transfer pricing is a critical issue in the organisation. Why?

Answers: Self Assessment

1. (i) 2. (d)
3. Product Life Cycle 4. Full
5. lowest 6. Minimum pricing
7. market norm 8. Marginal cost pricing

9. transfer pricing 10. traditional method
11. product life cycle

14.10 Further Readings

Books B.M. Lall Nigam and I.C. Jain, Cost Accounting, Prentice-Hall of India (P) Ltd.
Hilton, Maher and Selto, Cost Management, 2nd Edition, Tata McGraw-Hill
Publishing Company Ltd.
M.N. Arora, Cost and Management Accounting, 8th Edition, Vikas Publishing House
(P) Ltd.

M.P. Pandikumar, Management Accounting, Excel Books.

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