151. A product has variable cost CU 22 and fixed costs of CU 180,000 are expected to be spread over sales of 12,000 units. What price breaks even at that volume?

A) CU 15
B) CU 22
C) CU 37
D) CU 59

Correct: C difficult Pricing: breakeven price

Fixed cost per unit = 180,000 / 12,000 = CU 15. Breakeven price = 22 + 15 = CU 37. If you answered CU 15 you gave the fixed cost per unit only. If you answered CU 22 you gave the variable cost. If you answered CU 59 you added the variable cost twice.

152. A price rise from CU 40 to CU 44 reduces demand from 6,000 to 5,100 units. What is the price elasticity of demand (ignoring the sign)?

A) 0.67
B) 0.15
C) 1.50
D) 10.00

Correct: C difficult Pricing: elasticity

% change in demand = 900 / 6,000 = 15%. % change in price = 4 / 40 = 10%. Elasticity = 15 / 10 = 1.50. If you answered 0.67 you inverted the ratio. If you answered 0.15 you gave the change in demand as a decimal. If you answered 10.00 you gave the price change as a percentage.

153. Division X has spare capacity and variable cost of CU 21 a unit. Division Y can sell the finished product for CU 58 after further costs of CU 17 a unit. Between which transfer prices will both divisions benefit?

A) CU 21 to CU 58
B) CU 17 to CU 41
C) CU 38 to CU 58
D) CU 21 to CU 41

Correct: D difficult Transfer pricing: acceptable range

X's minimum is its variable cost of CU 21 (spare capacity). Y's maximum is net marginal revenue = 58 - 17 = CU 41. If you chose CU 21 to CU 58 you used the final selling price as Y's maximum. If you chose CU 17 to CU 41 you used Y's further cost as X's minimum. If you chose CU 38 to CU 58 you reversed the logic of both limits.

154. Variable cost is CU 24 a unit. Expected demand is: 4,000 units at CU 50; 5,200 at CU 46; 6,000 at CU 42; and 6,500 at CU 38. Fixed costs do not change. Which price maximises profit?

A) CU 50
B) CU 46
C) CU 42
D) CU 38

Correct: B difficult Pricing: demand schedule

Contribution: CU 50 gives 104,000; CU 46 gives 114,400; CU 42 gives 108,000; CU 38 gives 91,000. CU 46 is highest. If you chose CU 50 you picked the highest margin per unit. If you chose CU 42 or CU 38 you picked the higher volumes.

155. A garage pays mechanics CU 24 for 2,100 hours, of which 1,800 are chargeable. Workshop overheads are CU 31,500. A mark-up of 30% is added to the cost per chargeable hour. What is the charge-out rate per hour?

A) CU 59.15
B) CU 45.50
C) CU 36.40
D) CU 54.60

Correct: A difficult Pricing: charge-out rate

Cost per chargeable hour = (50,400 + 31,500) / 1,800 = CU 45.50. Rate = 45.50 x 1.30 = CU 59.15. If you answered CU 45.50 you left out the mark-up. If you answered CU 36.40 you left out overheads. If you answered CU 54.60 you used a 20% mark-up.

156. A customer buys 2,000 units at CU 25, with variable cost CU 16. An 8% discount on all units is offered, and the customer says it would then buy 2,300 units. What is the effect on contribution?

A) Increase of CU 1,900
B) Increase of CU 2,700
C) Decrease of CU 1,900
D) Decrease of CU 4,600

Correct: C difficult Pricing: discounts

Current contribution = 2,000 x 9 = 18,000. New price = 23, contribution 7, so 2,300 x 7 = 16,100. Contribution falls by CU 1,900. If you answered an increase of CU 1,900 you got the direction wrong. If you answered CU 2,700 you valued the extra 300 units at the old contribution. If you answered CU 4,600 you gave the discount cost on the new volume (2,300 x 2).

157. A tender is priced from direct materials of CU 84,000, direct labour of CU 56,000 and overheads at 60% of labour cost. The firm wants profit of 20% of the tender price. What is the price?

A) CU 208,320
B) CU 217,000
C) CU 173,600
D) CU 140,000

Correct: B difficult Pricing: contract tender

Total cost = 84,000 + 56,000 + 33,600 = 173,600. Price = 173,600 / 0.80 = CU 217,000. If you answered CU 208,320 you applied a 20% mark-up. If you answered CU 173,600 you left out profit. If you answered CU 140,000 you left out overheads and profit.

158. Demand rises by 25% when the price is cut by 10%. What is the effect on sales revenue?

A) Increase of 25.0%
B) Increase of 15.0%
C) Increase of 12.5%
D) Decrease of 10.0%

Correct: C difficult Pricing: elasticity and revenue

Revenue index = 0.90 x 1.25 = 1.125, an increase of 12.5%. If you answered 25% you ignored the price cut. If you answered 15% you added the percentages. If you answered a decrease of 10% you ignored the extra demand.

159. A product costs CU 260 and sells for CU 400. What is the mark-up on cost, to one decimal place?

A) 35.0%
B) 53.8%
C) 65.0%
D) 46.2%

Correct: B difficult Pricing: margin and mark-up

Profit = 140. Mark-up = 140 / 260 = 53.8%. If you answered 35.0% you gave the margin on price. If you answered 65.0% you gave cost as a percentage of price. If you answered 46.2% you subtracted the mark-up from 100%.

160. Which TWO statements are correct? (1) Premium pricing relies on a high perceived value for a differentiated product. (2) Price discrimination needs markets that can be kept separate. (3) Competitor-based pricing ignores cost completely. (4) Penetration pricing aims to maximise short-term profit quickly.

A) (1) and (3) only
B) (1) and (2) only
C) (2) and (4) only
D) (3) and (4) only

Correct: B difficult Pricing: strategies

Premium pricing depends on perceived value and price discrimination fails if customers can resell between markets. Competitor-based pricing still has to cover costs, and penetration pricing sacrifices short-term profit for market share. If you chose (3) you said costs do not matter. If you chose (4) you described skimming.

161. A product has a list price of CU 150. A trade discount of 20% is given, followed by a further 5% discount on the reduced price for large orders. What is the net price?

A) CU 114.00
B) CU 112.50
C) CU 120.00
D) CU 142.50

Correct: A difficult Pricing: sequential discounts

Net price = 150 x 0.80 x 0.95 = CU 114.00. If you answered CU 112.50 you added the discounts (25%). If you answered CU 120.00 you ignored the second discount. If you answered CU 142.50 you ignored the trade discount.

162. Products sell separately for CU 40, CU 55 and CU 30 and have variable costs of CU 22, CU 31 and CU 17. A bundle of all three is offered at 15% off the combined price. What is the contribution per bundle?

A) CU 36.25
B) CU 55.00
C) CU 18.75
D) CU 106.25

Correct: A difficult Pricing: bundles

Bundle price = 125 x 0.85 = 106.25. Variable cost = 70. Contribution = CU 36.25. If you answered CU 55.00 you ignored the discount. If you answered CU 18.75 you gave the discount only. If you answered CU 106.25 you gave the bundle price.

163. Division S transfers 5,000 units to Division B. S is credited at the market price of CU 30 and B is charged CU 19, the variable cost, under a dual pricing system. What amount is eliminated on consolidation?

A) CU 95,000
B) CU 150,000
C) CU 0
D) CU 55,000

Correct: D difficult Transfer pricing: dual pricing

S's credit is 150,000 and B's charge is 95,000. The difference of CU 55,000 is an adjustment that is removed from group profit. If you answered CU 95,000 you gave B's charge. If you answered CU 150,000 you gave S's credit. If you answered CU 0 you assumed dual pricing creates no difference.

164. A product costs CU 75 and sells for a price giving a 28% margin on selling price. Cost rises by 8% to CU 81. The firm wants to keep the same cash margin per unit. What is the new price?

A) CU 112.50
B) CU 104.17
C) CU 81.00
D) CU 110.17

Correct: D difficult Pricing: cost increase and margin

Old price = 75 / 0.72 = 104.17, so the cash margin is 29.17. New price = 81 + 29.17 = CU 110.17. If you answered CU 112.50 you raised the price by 8%, keeping the margin percentage. If you answered CU 104.17 you left the price unchanged. If you answered CU 81.00 you priced at cost.

165. A product sells for CU 50 with variable cost CU 30. A price cut of 8% is proposed. What percentage increase in volume is needed to keep total contribution unchanged?

A) 8.0%
B) 20.0%
C) 12.5%
D) 25.0%

Correct: D difficult Pricing: price reduction and volume

New price = 46, so contribution per unit falls from 20 to 16. Volume must rise by 20 / 16 - 1 = 25%. If you answered 8% you matched the price cut. If you answered 20% you divided the fall in contribution (4) by the old contribution (20). If you answered 12.5% you halved the correct answer.

166. A product has a full cost of CU 64. The firm adds a mark-up of 35% on cost. What is the selling price?

A) CU 98.46
B) CU 22.40
C) CU 99.00
D) CU 86.40

Correct: D difficult Pricing: cost-plus

Price = 64 x 1.35 = CU 86.40. If you answered CU 98.46 you treated 35% as a margin on price (64 / 0.65). If you answered CU 22.40 you gave the mark-up only. If you answered CU 99.00 you added 35 as a figure instead of a percentage.

167. A mark-up on cost of 60% is applied. What is the gross margin as a percentage of selling price?

A) 60.0%
B) 37.5%
C) 40.0%
D) 62.5%

Correct: B difficult Pricing: mark-up and margin

Cost 100, price 160, profit 60. Margin = 60 / 160 = 37.5%. If you answered 60% you gave the mark-up. If you answered 40% you subtracted the mark-up from 100. If you answered 62.5% you gave cost as a percentage of price.

168. A firm has capital employed of CU 500,000 and requires a return of 18%. Total costs for 5,000 units are CU 410,000. What price gives the required return?

A) CU 100.00
B) CU 82.00
C) CU 96.76
D) CU 18.00

Correct: A difficult Pricing: target return on capital

Required profit = 500,000 x 18% = 90,000. Price = (410,000 + 90,000) / 5,000 = CU 100. If you answered CU 82 you gave the cost per unit. If you answered CU 96.76 you applied 18% to cost instead of capital employed. If you answered CU 18 you gave the return percentage as a price.

169. A one-off order for 4,000 units would use capacity that otherwise produces 1,000 units of regular sales, each earning contribution of CU 12. Variable cost of the order is CU 38 a unit. What is the minimum price per unit?

A) CU 38
B) CU 50
C) CU 12
D) CU 41

Correct: D difficult Pricing: minimum price

Minimum price = variable cost + lost contribution per unit of the order = 38 + 12,000 / 4,000 = CU 41. If you answered CU 38 you ignored the displaced sales. If you answered CU 50 you spread the lost contribution over 1,000 units. If you answered CU 12 you gave the contribution per unit only.

170. A 5% price rise causes demand to fall by 8%. What is the price elasticity of demand (ignoring sign)?

A) 1.6
B) 0.625
C) 3.0
D) 13.0

Correct: A difficult Pricing: price elasticity

Elasticity = % change in demand / % change in price = 8 / 5 = 1.6, so demand is elastic. If you answered 0.625 you inverted the ratio. If you answered 3.0 you subtracted the percentages. If you answered 13.0 you added them.

171. The demand function is P = 120 - 0.02Q, where P is the price in CU. Marginal cost is a constant CU 40. What is the profit-maximising price?

A) CU 40
B) CU 80
C) CU 120
D) CU 2,000

Correct: B difficult Pricing: profit maximisation

MR = 120 - 0.04Q. Set MR = MC: 120 - 0.04Q = 40, so Q = 2,000. Price = 120 - 0.02 x 2,000 = CU 80. If you answered CU 40 you set price equal to marginal cost. If you answered CU 120 you gave the intercept. If you answered CU 2,000 you gave the quantity.

172. Division A has no spare capacity. It sells externally at CU 30 with a variable cost of CU 18 a unit, and full cost is CU 24. What is the minimum transfer price to Division B?

A) CU 18
B) CU 24
C) CU 12
D) CU 30

Correct: D difficult Transfer pricing: minimum price

Minimum transfer price = variable cost + opportunity cost = 18 + (30 - 18) = CU 30. If you answered CU 18 you assumed spare capacity. If you answered CU 24 you used full cost. If you answered CU 12 you gave the lost contribution only.

173. Division B can buy a part externally at CU 33. If it uses the part it sells the product for CU 70 after further processing costs of CU 31. What is the maximum transfer price Division B would pay?

A) CU 39
B) CU 31
C) CU 70
D) CU 33

Correct: D difficult Transfer pricing: maximum price

The maximum is the lower of the external price (33) and the net marginal revenue (70 - 31 = 39), which is CU 33. If you answered CU 39 you ignored the external alternative. If you answered CU 31 you gave the further processing cost. If you answered CU 70 you gave the final selling price.

174. A supplier offers a 2% discount for payment within 10 days instead of 60 days. What is the approximate annual cost of not taking the discount?

A) 14.9%
B) 2.0%
C) 14.6%
D) 12.4%

Correct: A difficult Discounts: annualised cost

Cost = 2 / 98 x 365 / 50 = 14.9%. If you answered 2.0% you gave the discount rate. If you answered 14.6% you used 2% instead of 2/98. If you answered 12.4% you used 60 days instead of 50 days.

175. A product sells for CU 50 with variable cost of CU 31. A customer offers to buy 550 units if given an 8% discount on all units. The alternative is a sale of 400 units at full price. What is the increase in contribution from taking the 550-unit order?

A) CU (650)
B) CU 2,850
C) CU 650
D) CU 8,250

Correct: C difficult Discounts: volume discount

Discounted price = 46, contribution = 15. 550 x 15 = 8,250 against 400 x 19 = 7,600, an increase of CU 650. If you answered CU (650) you reversed the sign. If you answered CU 2,850 you ignored the discount. If you answered CU 8,250 you gave the new contribution without comparing.