An athletic equipment company wants to make a new exercise bicycle with a speedometer, an odometer, a heart-rate monitor, and a small television. Which of the following describes target costing of that bicycle?
A) The company will find out how many similar products already exist and the price of those products. The company will learn which company is dominant in the market and get an idea of customer loyalty to competitors. Then it will set its price.
B) The company will figure out the production cost of the bicycle and then factor in its desired profit before setting the price.
C) The company will research what consumers would pay for such a bicycle and what the production cost of the bicycle would be. Then it will factor in its desired profit and price the product.
D) The company will set a price for the product that is higher than it needs to be and then hold regular sales to sell the product for a lower price.
E) The company will set a price that will cover its production costs and make a profit, and set the price with precise numbers to give the effect of a bargain price.
Answer: C
Explanation: C) In target costing, a company starts with the price it wants to charge, figures out the profit margin it wants, then determines what the costs must be to produce the product to meet the desired price and profit goals.
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a. Prepaid Rent of $7,000 on its balance sheet at December 31, 2015 b. Prepaid Rent of $8,000 on its balance sheet at December 31, 2015 c. Rent Expense of $8,000 on its 2015 income statement d. Rent Revenue of $7,000 on its 2015 income statement
The major difference between the Financial Reporting System (FRS) and the Management Reporting System (MRS) is the
a. FRS provides information to internal and external users; the MRS provides information to internal users b. FRS provides discretionary information; the MRS provides nondiscretionary information c. FRS reports are prepared using information provided by the General Ledger System; the MRS provides information to the General Ledger System d. FRS reports are prepared in flexible, nonstandardized formats; the MRS reports are prepared in standardized, formal formats