Deck 20: Pricing and Product Mix Decisions

Question 1

In the economic profit-maximising pricing model,how do the total revenue and total cost curves generally behave?
Total revenue
Total cost

A) Upward sloping at increasing rate
Upward sloping at decreasing rate
B) Upward sloping at increasing rate
Upward sloping at constant rate
C) Upward sloping at decreasing rate
Upward sloping,rate decreases,then increases
D) Downward sloping at constant rate
Downward sloping,then upward sloping

Answer 1

C

Question 2

In the economic profit-maximising pricing model,how do the marginal revenue and marginal cost curves generally behave?
Marginal revenue
Marginal cost

A) Downward sloping
Downward sloping
B) Downward sloping
Horizontal (zero slope)
C) Downward sloping
U-shaped
D) Upward sloping
U-shaped

Answer 2

C

Question 3

Which of the following statements regarding absorption cost pricing formulas is/are true?
I)Absorption cost pricing formulas provide a justifiable price that tends to be perceived as equitable by all parties
Ii)Since absorption cost information is necessary for external reporting,it is cost effective to use it for pricing.
Iii)Absorption cost-plus pricing formulas generally will result in a higher mark-up percentage than variable manufacturing cost formulas.

A) i and ii
B) ii and iii
C) i and iii
D) All of the given answers

Answer 3

A

Question 4

Which of the following represents the cost-based pricing formula?

A) Price = cost + (mark-up % × cost)
B) Price = cost + mark-up %
C) Price = mark-up % × cost
D) Price = cost + (mark-up % + cost)

Question 5

Which of the following statements regarding cost-plus pricing is/are true?

A) Cost-plus pricing formulas incorporate both fixed and variable costs.
B) Cost-plus pricing formulas establish a starting point in setting prices.
C) Cost-plus pricing formulas are useful for updating prices for existing products.
D) All of the given answers

Question 6

If the target profit is $60 000 for an annual volume of 480 units,the total annual fixed costs are $168 000 and the total variable cost per unit is $450,then what is the mark-up percentage on total variable cost?

A) 15.6%
B) 13.5%
C) 105.6%
D) 115.6%

Question 7

The curve that shows the relationship between sales price and quantity sold is called the:

A) marginal revenue curve
B) average cost curve
C) demand curve
D) revenue curve

Question 8

The marginal revenue curve:

A) shows the changes in total revenue that accompany a change in quantity sold.
B) shows the relationship between sales price and units sold.
C) shows the relationship between sales revenue and quantity.
D) shows the average price at which any particular quantity can be sold.

Question 9

Which of the following statements regarding the profit maximising model is/are true?
I)The profit maximising model is limited because a firm's demand and marginal revenue are difficult to discern
Ii)The marginal revenue and marginal cost model is valid for all forms of market.
Iii)Costing systems are not usually designed to measure the marginal changes in cost incurred as production and sales increase unit by unit.

A) i
B) ii and iii
C) iii
D) i and iii

Question 10

The Mixed-Up Floor Co.Ltd makes two products,carpet polish and floor deodoriser.Operating information from the previous year is as follows.Fixed costs of $20 000 per year are presently allocated evenly between both products.If the product mix were to change,total fixed costs would remain the same.Assuming everything produced for either product can be sold,how many units of each product should be produced and sold if machine hours are limited to 10 000?

A.
10 000 units
0 units
B.
5 000 units
10 000 units
C.
8 000 units
4000 units
D.
0 units
20 000 units

Question 11

Which of the following statements is false regarding price elasticity?

A) The impact of price changes on sales volume is defined as price elasticity.
B) Demand is elastic if a price increase has a large negative impact on sales volume.
C) Demand is elastic if price changes have no impact on sales quantity.
D) Demand is inelastic if price changes have little or no impact on sales quantity.

Question 12

If the target profit is $60 000 for an annual volume of 480 units,the total annual fixed costs are $168 000 and the total variable cost per unit is $450,then what is the mark-up percentage on full cost?

A) 15.6%
B) 13.5%
C) 105.6%
D) 51.4%

Question 13

Which of the following statements about prices is false?

A) Prices must cover all costs and a normal profit margin.
B) A variable cost-plus pricing formula requires a higher mark-up percentage than a total cost-plus pricing formula.
C) Different definitions of cost base,each combined with a different mark-up percentage,will result in the same price for a product or service.
D) If prices are set close to variable manufacturing costs,the firm will generally earn a higher profit margin.

Question 14

Which of the following statements regarding price is/are true?
I)Prices are determined by the market,subject to the constraint that costs must be covered in the long run
Ii)Prices are based on costs,subject to the constraint that customers and competitors will exert an influence
Ii)A balance of market forces and cost is important when making pricing decisions.

A) i
B) ii
C) ii and iii
D) All of the given answers

Question 15

The demand curve is also called the:

A) total revenue curve
B) marginal revenue curve
C) average revenue curve
D) marginal cost curve

Question 16

Which of the following is not an advantage of the variable cost pricing formula?

A) Variable cost analysis is consistent with cost volume profit analysis.
B) Variable cost data does not require the allocation of common fixed costs to individual product lines.
C) Variable costs help managers understand the profit implications of changes in price.
D) It is cost effective to use because it is required for external reporting.

Question 17

Which of the following formulas represents the mark-up percentage on full cost?

A) Mark-up % = target profit / (annual volume × total cost per unit)
B) Mark-up % = target profit × total cost per unit
C) Mark-up % = target profit × annual volume
D) Mark-up % = (target profit × total cost per unit)/ annual volume

Question 18

If the average invested capital is $300 000 and the target return on investment is 20 per cent,what is the target profit?

A) $50 000
B) $60 000
C) $70 000
D) $75 000

Question 19

Which of the following is not an issue when making a pricing decision?

A) Legal issues like collusion and price discrimination.
B) Political considerations
C) Environmental regulations
D) Competition

Question 20

Managers base prices on product costs due to many reasons.Which of the following is not one of the reasons?

A) Most companies sell many products and services and cost-based pricing provides a simple and direct approach.
B) Cost-based pricing provides a good starting point for managers.
C) The cost of a product or service provides a lower limit or floor,below which the price cannot be set in the long run.
D) Cost-based pricing is useful for standard cost analysis.

Question 21

The Houston Company manufactures office equipment.They are ready to introduce a new line of desktop copiers.The following data concerns the copiers:
If the company uses cost-plus pricing based on total variable cost,what price must the company charge when the mark-up percentage is 150 per cent?

A) $360
B) $525
C) $600
D) $495

Question 22

The Houston Company manufactures office equipment.They are ready to introduce a new line of desktop copiers.The following data concerns the copiers:
If the company uses cost-plus pricing based on absorption cost,what price must the company charge when the mark-up percentage is 120 per cent?

A) $459
B) $420
C) $759
D) $594

Question 23

Silco Pty Ltd manufactures various lines of computer equipment.They are planning to introduce a line of laptop computers in January 2008.Current plans call for the production and sale of 1000 computers with estimated production costs as follows.The average amount of capital invested in the laptop computer line is $900 000 and Silco's target return on investment for the line is 18 per cent.What price must Silco charge if the company uses cost-plus pricing based on total variable cost?

A) $1930
B) $712
C) $1192
D) $1030

Question 24

Consider the following statements regarding cost-plus pricing formulas.i.Full cost pricing formulas have the advantage of keeping the manager's attention focused on covering total costs
Ii)With cost-plus pricing formulas,management must consider market conditions and likely actions of competitors.
Iii)Variable cost-plus formulas have the advantage of not obscuring important information about cost behaviour.Which of the above statements is/are true?

A) i
B) ii and iii
C) i and iii
D) All of the given answers

Question 25

Silco Pty Ltd manufactures various lines of computer equipment.They are planning to introduce a line of laptop computers in January 2008.Current plans call for the production and sale of 1000 computers with estimated production costs as follows.The average amount of capital invested in the laptop computer line is $900 000 and Silco's target return on investment for the line is 18 per cent.What price must Silco charge if the company uses cost-plus pricing based on full cost?

A) $868
B) $900
C) $1 192
D) $1 930

Question 26

Tots N Style Pty Ltd has the following data concerning a decorator playpen it manufactures:
If the company uses cost-plus pricing based on absorption costs,determine the mark-up percentage used by the company to obtain a price of $120.

A) 140%
B) 118%
C) 71%
D) 243%

Question 27

Tots N Style Pty Ltd has the following data concerning a decorator playpen it manufactures:
If the company uses cost-plus pricing based on variable manufacturing costs,determine the mark-up percentage used by the company to obtain a price of $105.

A) 350%
B) 300%
C) 250%
D) 200%

Question 28

Sample Company reported the following costs during 2008 for the manufacture and sale of 2000 units:
The average amount of capital invested in the product line during the year was $500 000 and the targeted return on investment was 20 per cent.If Sample's price per unit was $245 and the mark-up percentage was 53 per cent,what pricing formula was used by the company?

A) Total variable cost-plus
B) Variable manufacturing cost-plus
C) Absorption cost-plus
D) Time and materials cost-plus

Question 29

Town and Country Auto Repair uses time and material pricing.The Body Shop has the following cost data.Determine the amount needed to be added to each dollar of material cost to obtain the material charge.

A) $0.48
B) $0.08
C) $0.06
D) $0.10

Question 30

Silco Pty Ltd manufactures various lines of computer equipment.They are planning to introduce a line of laptop computers in January 2008.Current plans call for the production and sale of 1000 computers with estimated production costs as follows.The average amount of capital invested in the laptop computer line is $900 000 and Silco's target return on investment for the line is 18 per cent.If Silco uses cost-plus pricing based on absorption cost,determine the mark-up percentage the company must use.

A) 21.6%
B) 15.7%
C) 29.5%
D) None of the given answers

Question 31

The Houston Company manufactures office equipment.They are ready to introduce a new line of desktop copiers.The following data concerns the copiers:
If the company uses cost-plus pricing based on variable manufacturing cost,what price must the company charge when the mark-up percentage is 200 per cent?

A) $585
B) $450
C) $630
D) $540

Question 32

Tots N Style Pty Ltd has the following data concerning a decorator playpen it manufactures:
If the company uses cost-plus pricing based on total variable costs,determine the mark-up percentage used by the company to obtain a price of $105.

A) 150%
B) 300%
C) 250%
D) 200%

Question 33

Tots N Style Pty Ltd has the following data concerning a decorator playpen it manufactures:
If the company uses cost-plus pricing based on full cost,determine the mark-up percentage used by the company to obtain a price of $105.

A) 100%
B) 75%
C) 50%
D) 25 %

Question 34

The Houston Company manufactures office equipment.They are ready to introduce a new line of desktop copiers.The following data concerns the copiers:
If the company uses cost-plus pricing based on full cost,what price must the company charge when the mark-up percentage is 40 per cent?

A) $462
B) $567
C) $600
D) $513

Question 35

Town and Country Auto Repair uses time and material pricing.The Body Shop has the following cost data.If a particular job takes 10 hours in labour and $500 in materials,determine the price charged for the job.

A) $775
B) $850
C) $390
D) $890

Question 36

Silco Pty Ltd manufactures various lines of computer equipment.They are planning to introduce a line of laptop computers in January 2008.Current plans call for the production and sale of 1000 computers with estimated production costs as follows.The average amount of capital invested in the laptop computer line is $900 000 and Silco's target return on investment for the line is 18 per cent.What is the mark-up percentage if the company uses cost-plus pricing based on full cost?

A) 116.7%
B) 15.7%
C) 121.6%
D) 58.9%

Question 37

Town and Country Auto Repair uses time and material pricing.The Body Shop has the following cost data.Determine the time charge per hour.

A) $18.00
B) $35.00
C) $25.50
D) $40.00

Question 38

An approach to pricing in which two charges are determined,one charge for labour used on the job and another charge for the materials used on the job,is called:

A) time and material pricing
B) variable cost pricing
C) competitive bidding
D) absorption cost pricing

Question 39

Which of the following statements about time and material pricing is/are true?
I)The labour charge includes the direct cost of the employee's time
Ii)The labour charge includes a charge to cover various overhead costs.
Iii)The labour charge includes a handling charge for material.

A) i
B) i and ii
C) i and iii
D) All of the given answers

Question 40

Silco Pty Ltd manufactures various lines of computer equipment.They are planning to introduce a line of laptop computers in January 2008.Current plans call for the production and sale of 1000 computers with estimated production costs as follows.The average amount of capital invested in the laptop computer line is $900 000 and Silco's target return on investment for the line is 18 per cent.What is the mark-up percentage if the company uses cost-plus pricing based on total variable cost?

A) 116.7%
B) 142.7%
C) 121.6%
D) 58.9%

Question 41

In linear programming,a constraint represents:

A) the objective function
B) the contribution margin per unit
C) the limitations faced by the firm
D) the break-even level of activity

Question 42

Linear programming is useful:

A) when there is only one product
B) when there are many products
C) only when an activity-based costing system is in use
D) when there is only one constraint

Question 43

The Mixed-Up Floor Company Ltd makes two products,carpet polish and floor deodoriser.Operating information from the previous year is as follows.Fixed costs of $20 000 per year are presently allocated evenly between both products.If the product mix were to change,total fixed costs would remain the same.Calculate the contribution margin per machine hour for floor deodoriser.

A) $4.00
B) $2.00
C) $3.00
D) $0.25

Question 44

Which of the following statements about competitive bidding is/are true?
I)The higher the price that is bid,the greater the profit,if the firm gets the contract
Ii)Bidding a higher price increases the probability of obtaining the contract.
Iii)A company bidding low enough to ensure the acceptance of a contract may have bid too low to make an acceptable profit on the job.

A) i
B) ii
C) i and iii
D) All of the given answers

Question 45

Linear programming is used by decision makers when there are:

A) limited resources for labour
B) scarce resources for machine hours
C) scarce resources for both labour and machine hours
D) multiple scarce resources

Question 46

Under competitive bidding when a company has no excess capacity,the bid price would normally include:

A) only the incremental costs of the job
B) only the variable costs of the job plus a modest contribution margin
C) the full cost of the job including capacity-producing costs
D) the full cost of the job excluding capacity-producing costs

Question 47

Which of the following statements about time and material pricing is/are true?
I)The material charge includes the direct cost of the employee's time
Ii)The material charge includes the direct cost of materials used.
Iii)The material charge includes a charge for material handling and storage.

A) ii
B) iii
C) ii and iii
D) All of the given answers

Question 48

Contribution margin per machine hour can be calculated by dividing:

A) machine hours required per unit by sales margin per unit
B) contribution margin per unit by machine hours required per unit
C) total contribution margin per unit by total sales revenue per unit
D) total machine hours required by total contribution margin

Question 49

If a firm has excess capacity,which of the following is a sensible bidding strategy?

A) Set a price to cover all costs.
B) Base the bid on the incremental costs incurred because the job will contribute toward covering the company's fixed costs and profit.
C) Base the bid solely on direct labour hours.
D) Common fixed costs must be allocated to individual jobs before preparing the bid.

Question 50

What term describes a pricing strategy in which the initial price is set relatively low for a new product in order to gain a large market share?

A) Penetration pricing
B) Target pricing
C) Designed pricing
D) Market share pricing

Question 51

How are the time charges calculated?

A) Hourly labour cost
B) Hourly labour cost + annual overhead
C) Hourly labour cost + [annual overhead (excluding material handling and storage)/ annual labour hours] + hourly charge to cover profit margin
D) Hourly labour cost + hourly charge to cover profit margin

Question 52

Econo Auto Repair estimates the following costs for 2008.What material charge formula would be used to include a charge for the handling and storage of material on every job?

A) Cost of material only
B) Cost of material + $2 per labour hour
C) Cost of material + $0.05 per $1 of material
D) Cost of material + $0.50 per labour hour

Question 53

Which of the following statements regarding the manufacture of new products is/are true?
I)Uncertainties about the potential market for the product pose problems when pricing these products
Ii)Uncertainties regarding obstacles that will be encountered in manufacturing these products pose pricing problems.
Iii)Uncertainties about production costs will not influence pricing decisions because these types of products are generally sold in a non-competitive market.

A) i
B) iii
C) i and ii
D) All of the given answers

Question 54

Price skimming is when:

A) the initial product price is set low and is kept constant.
B) the initial product price is set high giving high short-term profits;then the price is slowly lowered.
C) the initial high product price is set high and raised.
D) the initial product price is set low and raised.

Question 55

Which of the following statements about product-cost distortions and product pricing is/are true?
I)Under conventional volume-based product costing systems,high volume and relatively simple products are often overcosted while low volume and complex products are undercosted
Ii)The use of a conventional volume-based product costing system may result in significant cost distortions among product lines.
Iii)Overpricing high-volume products can lead to pricing errors.

A) i and ii
B) ii and iii
C) i and iii
D) All of the given answers

Question 56

The pricing strategy that results in greater initial sales volume but lower unit profits is called:

A) Skimming pricing
B) Target pricing
C) Predatory pricing
D) Penetration pricing

Question 57

In linear programming,the objective function is typically based on:

A) the selling price of the products
B) the variable cost of the products
C) the full cost of the products
D) the contribution margin of the products

Question 58

Which of the following statements about competitive bidding is/are true?

A) In a competitive bidding situation,the criterion to select the contractor is always based solely on the design specifications of the job.
B) Competitive bidding occurs when two or more companies submit a sealed bid for a product,service or project to a potential buyer.
C) From the perspective of the bidder,quantitative factors are more important than qualitative factors in competitive bidding situations.
D) In a competitive bidding situation,the criterion to select the contractor is always based solely on the design specifications of the job AND competitive bidding occurs when two or more companies submit a sealed bid for a product,service or project to a potential buyer.

Question 59

The Mixed-Up Floor Co.Ltd makes two products,carpet polish and floor deodoriser.Operating information from the previous year is as follows.Fixed costs of $20 000 per year are presently allocated evenly between both products.If the product mix were to change,total fixed costs would remain the same.Assuming everything produced for either product can be sold,how many units of each product should be produced and sold if machine hours are limited to 10 000?

Carpet polish
Floor deodoriser

A) 10 000 units
0 units
B) 5 000 units
10 000 units
C) 8 000 units
4000 units
D) 0 units
20 000 units

Question 60

Which of the following statements regarding product cost distortion and product pricing is/are true?

A) Product cost distortions will have a more serious impact on product pricing if the market prices are a major factor in setting prices.
B) Product cost distortions will have a more serious impact if cost-plus pricing is a major tool for determining prices.
C) If product costs are distorted,it will not be possible to determine the market price.
D) Product cost distortions will have a more serious impact if cost-plus pricing is a major tool for determining prices AND if product costs are distorted,it will not be possible to determine the market price.

Question 61

The optimal decision in the linear programming model depends on:

A) the intersection of the constraint lines
B) the slope of the objective function
C) the slope of the objective function combined with all constraints
D) the feasible region interact with the smallest constraint

Question 62

Which of the following statements about price-fixing contracts is/are true?
I)Price-fixing contracts are prohibited where they have the effect of substantially lessening competition
Ii)Price-fixing contracts are a means of quoting different prices for different customers.
Iii)Price-fixing contracts result in controlling the prices of goods or services.

A) i
B) ii and iii
C) i and iii
D) iii

Question 63

A firm employs average assets of $600 000 and calculates its mark-up on full cost based on a desired return on investment of 20 per cent.Expected production is 10 000 units,and the full cost per unit is $80.What is the mark-up percentage?

A) 20%
B) 120%
C) 15%
D) 25%

Question 64

One of the advantages of activity-based costing (ABC)over traditional methods of overhead allocation,when combined with cost-based pricing,is that ABC avoids the problem of:

A) low-volume products being underpriced
B) low-volume products being overpriced
C) high-volume products being underpriced
D) complex products being overpriced

Question 65

The Trade Practices Act 1974 (Cwlth)is legislation that:

A) restricts certain types of commercial activities,including pricing
B) restricts employee benefits
C) describes loan procedures
D) generally allows the use of price-fixing contracts

Question 66

C Limited manufactures specialist medical equipment.Recruitment and training of manufacturing staff is difficult and C's operations management estimates that only 160 000 hours of labour at a rate of $50 per hour will be available in the next financial year.The following details relate to C's planned production of three products X,Y and Z for the next 12 months.To maximise profits the products C should manufacture are:

A) Y then Z
B) Y then Z,then X.
C) X then Z.
D) X then F,then Y.

Question 67

A firm produces products X,Y and Z with contribution margins of $4,$5 and $10 respectively.The firm has only 5000 machine hours available for a particular period.Machine hours required for each of the products are 1,1 and 5 hours respectively.Demand for the products is 1000 for X,3000 for Y and 2000 for Z.How many units of each product will the firm produce?

A) 2000 Z
B) 1000 X,3000 Y,2000 Z
C) 3000 Y,1000 X,200 Z
D) 2000 Z,3000 Y

Question 68

Which of the following statements is not correct? Linear programming is a technique designed to recognise specifically that:

A) the choice of the optimal mix involves a cost-benefit trade-off
B) firms will focus on the products with the highest contribution margin
C) there may be more than one production constraint
D) products compete with each other for limited resources

Question 69

It is illegal for companies to offer different prices to different customers for the same goods or services,except:

A) where the company is trying to meet a competitor's price
B) where the company's corporate vision explicitly states this is a company policy
C) where the company is pursuing a cost leadership strategy
D) There is no exception: price discrimination is always illegal.

Question 70

Waverly Ltd produces commercial grade washing machines.The Karewasher is currently selling for $2000 per unit.The company wants to introduce a new model,Supawasher,which uses less water per load.The comparative life-time costs of the two models are as follow:
The economic value of a Supawasher is: (ignore time value of money)

A) $300
B) $2300
C) $2900
D) $4900

Question 71

Gossip Goose (GG)and Tabloid Chicks (TC)are two magazines renowned for their reporting of unverifiable entertainment news.Steven Hassaloff is the marketing director of GG,and Jasmine Trotter is the advertising manager of TC.Steven and Jasmine met at the local pub one day and decided to both sell their magazines at the same lower-than-average price ($3),in order to increase their market shares and lower the level of competitive pressure in the market.Steven and Jasmine's agreement is an example of:

A) Resale price maintenance,and is illegal
B) Resale price maintenance and is legal only when both parties reach an agreement in the absence of coercion
C) Price-fixing and is illegal
D) Price-fixing and is legal only when both parties reach an agreement in the absence of coercion

Question 72

Karl's Kitchens is experimenting with different vinegars for sale on the domestic market.The contribution margins per carton for three types V1,V2 and V3 are $120,$100 and $150 respectively.The firm is constrained in terms of labour hours,and the labour hours required per carton of each type of vinegar is 2 hours,1.5 hours and 3 hours respectively.Assume the firm has 2240 available labour hours per month,and the monthly demand is 1200 cartons of V1,800 cartons of V2 and 300 cartons of V3.What is the product mix that will maximise profit?

A) 800 V2,520 V1
B) 300 V3,670 V2
C) 1 200 V1,800 V2,300 V3
D) 1 120 V1

Question 73

Which of the following describes,most accurately,what the area of feasible solutions on the linear programming graph represents?

A) The area bordered by the intersection of the two constraint lines.
B) The area bordered by the intersection of all constraint lines.
C) The area on the graph that contains all possible combinations of products,including the optimal combination.
D) The area bordered by the intersection of all constraint lines AND the area on the graph that contains all possible combinations of products,including the optimal combination.

Question 74

Avocado Ltd produces small electronic components for kitchen appliances.This year it expects to produce 10 000 units of component X.The variable manufacturing cost of component X represents 50% of its total costs.The target profit is $2 per unit.Using the cost-plus pricing approach based on total costs,the selling price per unit of component X is $20.If Avocado Ltd decides to change its cost-plus pricing approach to base the mark up percentage on variable manufacturing costs,the selling price for each unit of component X will be:

A) $10
B) $20
C) $30
D) Not enough information.

Question 75

A firm employs average assets of $600 000 and calculates its mark-up on full cost based on a desired return on investment of 20 per cent.Expected production is 10 000 units,and the full cost per unit is $80.If the firm changed its pricing policy and determined in future to calculate its mark-up based on absorption cost,which of the following statements (if any)is correct about the firm's new mark-up percentage?

A) The mark-up percentage will be lower.
B) The mark-up percentage will be higher.
C) Because the price charged will be the same,there will be no change in the mark-up percentage.
D) None of the given answers

Question 76

One of the consequences of traditional methods of overhead allocation combined with cost-based pricing is that:

A) low-volume products can be overpriced
B) high-volume products can be underpriced
C) simple products can be underpriced
D) high-volume products can be overpriced

Question 77

A firm has excess capacity,and has received an order for 50 000 units at $20 each over and above its normal production activity of 600 000 units.To meet this order,new equipment at a cost of $200 000 would have to be bought,and this equipment would have to be scrapped after the order had been filled.The firm currently sells for $50 per unit,has variable costs of $15.80,and fixed costs of $600 000.What is the additional profit (loss)for the firm if it accepts the order?

A) Loss of $10 000
B) Profit of $40 000
C) Loss of $40 000
D) Profit of $10 000

Question 78

The managing director of H Limited is setting the production plan for the next financial year.H has a shortage of skilled labour and wishes to maximise the profitability of the company.H manufactures three products X,Y and Z.There is 200 000 hours of skilled labour available in the year at a cost of $10 per hour.The following information relates to each product.Assuming all relevant information is provided,in what order should H manufacture its products to maximise profit in the current year?

A) Z then X
B) X then Z
C) X,Y then Z
D) None of the given answers

Question 79

What is price discrimination?

A) Quoting the same price to all customers
B) Quoting different prices to different customers for different goods and services
C) Quoting different prices to different customers for the same goods or services
D) Quoting different prices to a customer,depending on quantity of goods or services demanded

Question 80

A firm has excess capacity,and has received an order for 50 000 units at $20 each over and above its normal production activity of 600 000 units.To meet this order,new equipment at a cost of $200 000 would have to be bought,and this equipment would have to be scrapped after the order had been filled.The firm currently sells for $50 per unit,has variable costs of $15.80,and fixed costs of $600 000.Assuming the firm had been aggressively seeking the business of the customer who requested the special order,what would be the minimum price that the firm would be prepared to charge?

A) $15.80
B) $50
C) $27.80
D) $19.80