Question

1. How is​ activity-based costing useful for pricing​ decisions?

A. It helps managers to manage costs during value engineering by identifying the cost impact of​ eliminating, reducing, or changing various activities.

B. It gives managers more accurate​ product-cost information for making pricing decisions.

C. It allows managers to focus on​ locked-in costs,​ that, if eliminated would not reduce the actual value or utility customers gain from using the product or service.

D. Both A and B are correct.

2. What is a target cost per​ unit?

A. The estimated cost for a product that potential customers are willing to pay.

B.The estimated​ long-run cost per unit of a product​ (or service)​ that, when sold at the target​ price, enables the company to achieve the targeted operating income per unit.

C. The estimated​ short-run cost per unit of a product​ (or service)​ that, when sold at the target​ price, enables the company to achieve the targeted operating income per unit.

D. A cost that customers perceive as adding​ value, or​ utility, to a product or service. The added charge for the value enables the company to achieve the targeted operating income.

Answer 1

Answer:

Question 1:

Option (D). Both A and B are correct.

Activity-based costing gives managers more accurate​ product-cost information for making pricing decisions. Activity-based costing helps managers to manage costs during value engineering by identifying the cost impact of​ eliminating, reducing, or changing various activities.

Question 2:

Option(B). is correct.

A target cost per​ unit is The estimated​ long-run cost per unit of a product​ (or service)​ that, when sold at the target​ price, enables the company to achieve the targeted operating income per unit.