Management Accounting MCQ Questions and Solutions with Explanations | Management

Companies that perform in less competitive markets and their market offerings significantly differ are classified as cost based approach. Cost based pricing is one of the pricing methods of determining the selling price of a product by the company, wherein the price of a product is determined by adding a profit element (percentage) in addition to the cost of making the product.

Process which leads to disassembling and analysis of competitors, operating activities to become acquainted with competitors' technologies is called reverse engineering. Reverse engineering, also called back engineering, is the process by which a man-made object is deconstructed to reveal its designs, architecture, or to extract knowledge from the object; similar to scientific research, the only difference being that scientific research is about a natural phenomenon.

Technique, which accumulates and tracks revenues of business function in value chain attributed to each market offering from R&D to final customer support is called life cycle budgeting. A life-cycle budget is an estimate of the total amount of sales and profits to be garnered from a product over its estimated life span.

Major influential factors on supply and demand include customers.

Product costing technique in which markup component is added into cost base, to set a target price is known as cost plus pricing. Product costing methods are used to assign a cost to a manufactured product.

Target annual operating income = Invested capital × Target rate of return on investment
= $150000 × 16% = $24,000.

In cost-plus pricing, 'plus' refers to a component named as markup. Cost-plus pricing, also called markup pricing, is the practice by a company of determining the cost of the product to the company and then adding a percentage on top of that price to determine the selling price to the customer.

Span time from initial research and development of product till support and customer service, if not offered for that particular product will be called product life cycle. This concept is used by management and by marketing professionals as a factor in deciding when it is appropriate to increase advertising, reduce prices, expand to new markets, or redesign packaging.

Kind of costs that has been occurred in past are also known as sunk costs. A sunk cost is a cost that an entity has incurred, and which it can no longer recover. Sunk costs should not be considered when making the decision to continue investing in an ongoing project, since these costs cannot be recovered.

Factor, which are largely considered in making or buying decisions isquality of suppliers and dependability of suppliers .