When Profit-Maximizing Firms in Competitive Markets Are Earning Profits

question 166

Multiple Choice

When profit-maximizing firms in competitive markets are earning profits,

• A)market demand must exceed market supply at the market equilibrium price.
• B)market supply must exceed market demand at the market equilibrium price.
• C)new firms will enter the market.
• D)the most inefficient firms will be encouraged to leave the market.

Understand the application and calculation of cost concepts in product pricing.

Differentiate between various pricing concepts like cost-plus, target cost, and competition-based pricing.

Calculate desired profit based on return on investment criteria.

Calculate markup percentage and determine its impact on product pricing.

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Definitions:

Labor Rate Variance

The difference between the actual labor rate paid and the standard rate expected, multiplied by the total hours worked.

Labor Efficiency Variance

The variance between the real hours spent producing a good or service and the anticipated standard hours, times the standard wage rate.

Variable Overhead Rate Variance

The difference between the actual variable overhead costs incurred and the standard variable overhead expected for the actual production achieved.

Variable Overhead Efficiency Variance

A measure used in cost accounting to evaluate the efficiency of variable production costs, comparing the actual hours worked to the standard hours expected.