CPP - Certified Pricing Professional Costing and Profitability Analysis Questions and Answers

Question 1

A company is launching a new product in a highly competitive market.
To ensure profitability, management first determines the selling price at which the product will be competitive and then subtracts the desired profit margin to arrive at a maximum allowable production cost.
Which costing method is the company employing?

Accepted Answer

Target Costing

Answer

Cost-Plus Costing

Answer

Activity-Based Costing

Answer

Variable Costing

Question 2

A manufacturing firm wants to more accurately allocate its overhead costs (e.g., factory rent, utilities, setup costs) to its diverse range of products. The current method of using a single plant-wide overhead rate based on direct labor hours is distorting product profitability. Which of the following costing systems would provide a more precise allocation of these indirect costs?

Accepted Answer

Activity-Based Costing (ABC)

Answer

Job Order Costing

Answer

Process Costing

Answer

Standard Costing

Question 3

A consulting firm is conducting a customer profitability analysis. Which of the following is a primary goal of this type of analysis?

Accepted Answer

To identify which customers generate the most profit after considering all revenues and costs associated with serving them.

Answer

To determine the breakeven point for each customer engagement.

Answer

To allocate all corporate overhead costs equally among all customers.

Answer

To set product prices based on the value perceived by the most profitable customer segment.

Question 4

A company has fixed costs of $200,000 per year. Its product sells for $150 per unit, and the variable cost per unit is $70. How many units must the company sell to break even?

Accepted Answer

2,500 units

Answer

1,333 units

Answer

2,857 units

Answer

2,000 units

Question 5

Which pricing strategy is primarily focused on internal factors, specifically the costs of production and a desired markup, rather than external market factors like customer perception of value?

Accepted Answer

Cost-Plus Pricing

Answer

Value-Based Pricing

Answer

Competitive Pricing

Answer

Dynamic Pricing

Question 6

A software-as-a-service (SaaS) company analyzes its customer base and finds that its 'Whale' segment, though small in number, generates 70% of total revenue. However, a profitability analysis reveals this segment is only marginally profitable due to extensive custom feature development, dedicated 24/7 support, and significant onboarding costs. What is the most likely conclusion from this profitability analysis?

Accepted Answer

High revenue does not always equal high profitability; the cost-to-serve must be carefully managed for all customer segments.

Answer

The company should immediately double the price for the 'Whale' segment to increase profitability.

Answer

The high revenue from the 'Whale' segment automatically makes it the most valuable and should be the sole focus.

Answer

The company should abandon the 'Whale' segment because its profitability is low.