1. Role of product pricing

❌ Product price is universally determined by costs
❌ Price is determined by market and has little internal role
✅ Price influences revenue earned and influences market demand

Explanation: Price affects both revenue (price × quantity) and customer demand. It is one of the most important internal decisions.

2. Factors that influence product prices (Check all that apply)

✅ Costs
❌ Cooperatives
✅ Competitors
✅ Customers

Explanation: The 3 main pricing influences are Costs, Competitors, Customers.

3. Julia Corporation pricing decisions (Check all that apply)

❌ Charging a price lower than cost is never feasible
✅ Short-term price below cost is possible
❌ Long-term price below cost is possible
✅ Long-term pricing below cost is difficult to sustain

Explanation:
Short-term: firms can price below cost to attract customers or utilize excess capacity.
Long-term: unsustainable because total costs must eventually be covered.

4. Avery Company in competitive market (Check all that apply)

✅ Must review market price before competing
❌ Will use cost-based pricing
✅ Will use market-based pricing
❌ Needs extra cost accuracy to determine price

Explanation: In competitive markets with low market share, firms follow market price, not cost-based pricing.

5. Best description of decentralization

✅ Extent to which decision-making rights are distributed
❌ Width of hierarchy
❌ Static feature
❌ Poor choice when local knowledge is important

Explanation: Decentralization = pushing decision rights down to where knowledge exists.

6. Transfer price definition

❌ Fails to allocate profits
❌ Always negotiated
✅ Price applied to internal transfer of goods/services
❌ Only cash transfers

Explanation: Transfer pricing applies to internal transactions between divisions.

7. Approaches to transfer pricing (Check all that apply)

✅ Negotiated
✅ Variable-cost
✅ Market-price
✅ Full-cost

Explanation: These are the four standard transfer-pricing methods.

8. Supplier division with excess capacity—acceptable price

❌ True
✅ False

Explanation:
With excess capacity, the supplier has no opportunity cost.
Minimum acceptable transfer price = variable cost only, not variable cost + contribution margin.

🧾 SUMMARY TABLE

Q	Correct Answer	Key Idea
1	Price influences revenue & demand	Pricing impacts revenue & demand
2	Costs, Competitors, Customers	3 Cs of pricing
3	Short-term below cost OK; long-term unsustainable	Pricing horizon
4	Market-based pricing; review market price	Competitive markets
5	Distributed decision rights	Decentralization
6	Internal transfer price	Transfer pricing
7	All four listed	Transfer-pricing approaches
8	False	With excess capacity → min price = variable cost

Module 2 Conceptual Quiz :Accounting for Business Decision Making: Strategy Assessment and Control (Fundamentals of Accounting Specialization) Answers 2025