Question 1

Which of the following statements is correct in respect of the key feature of dual pricing?

Options :

A : The selling price recorded by the selling division is higher than the cost recorded by the receiving division.

B : Internal customers are offered trade discounts depending on the number of units they purchase.

C : Internal transfers are priced at marginal cost and a lump sum payment is made subsequently to contribute to fixed costs.

D : Internal customers are charged a lower price than external customers to reflect savings in distribution costs.

Answer: A

Question 2

Division A is an investment centre with assets of $7.3 million. The following is an extract from the annual budget for division A:

The cost of capital is 14%.
Calculate the residual income for division A.

Options :

A : $808,000

B : $1,727,800

C : $358,000

D : $2,008,000

Answer: A

Question 3

A company manufactures and sells a range of products. Relevant data for one unit of a particular product are as follows.

The company is using target costing to ensure that it achieves a contribution of 40% of the market selling price.
In order to achieve the target cost, by how much does the company need to reduce the variable cost per unit?

Options :

A : $ 2.10

B : $ 0.50

C : $ 1.40

D : $ 2.60

Answer: B

Question 4

Firefighters risk serious and potentially fatal accidents whenever they attend an incident.
Which of the following statements is correct?

Options :

A : The risk of serious accidents should be accepted in all but the most extreme incidents.

B : The risk of serious accidents should always be accepted because that is what firefighters are paid to do.

C : The risk of serious accidents should be avoided because the risk has a high probability and a high impact.

D : Every incident should be the subject of a detailed and thorough risk assessment before the firefighters are permitted to respond.

Answer: A

Question 5

An organization is competing in the high technology market. It sets a high sales price for its products initially to target the early adopters, and then the price is gradually reduced.
This pricing strategy is known as:

Options :

A : Market skimming

B : Penetration pricing

C : Premium pricing

D : Loss leader pricing

Answer: A

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