How Do Managers and Companies Set Price and Quantity Standards

question 49

Multiple Choice

How do managers and companies set price and quantity standards?

• A)Based on a manager's previous experience at another company.
• B)Based on historical data,industry averages,and the results of process studies.
• C)Based on the ideal budget created for the operating division.
• D)Based on prior period variances.

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Definitions:

Fixed Expenses

Costs that do not change with the level of production or sales activities within a certain range or period.

Variable Expenses

Costs that change in proportion to the level of activity within a business.

Contribution Margin

The amount by which the sales revenue of a product exceeds its variable costs, indicating how much contributes towards covering fixed costs and generating profit.

Break-Even Point

The point at which total costs and total revenues are equal, resulting in no net gain or loss for the business.