Conversion cost pricing
Answer(s): B
Conversion costs consist of direct labor and factory overhead, the costs of converting raw materials into finished goods. Normally, a company does not consider only conversion costs in making pricing decisions, but if the customer were to furnish the raw materials, conversion cost pricing would be appropriate.
Life-cycle costing
Answer(s): A
Life-cycle costing estimates a product's revenues and expenses over its expected life cycle. This approach is especially useful when revenues and related costs do not occur in the same periods. It emphasizes the need to price products to cover all costs, not just those for production. Hence, costs are determined for all value chain categories: upstream (R&D, design), manufacturing, and downstream (marketing, distribution, and customer service). The result is to highlight upstream and downstream costs in the cost planning process that often receive insufficient attention.
Joint costs are those costs
Answer(s): D
Joint costs are the common costs of producing two or more inseparable products up to the point at which they become separable (the split-off point). The products are then sold as identifiably separate products or are processed further.
The difference between the sales price and total variable costs is
Contribution margin equals sales revenue minus all variable costs. It is the portion of sales available for covering fixed costs and profit.
Unit fixed costs
A unit fixed cost is equal to total fixed costs divided by an appropriate denominator or activity level. The resulting average or unit fixed cost must be used with extreme caution in decision making.
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