The president of Global Wholesalers would like to offer special sale prices to the firm's best customers under the following terms:
1) The prices will apply only to units purchased in excess of the quantity normally purchased by a customer.
2) The units purchased must be paid for in cash at the time of sale.
3) The total quantity sold under these terms cannot exceed the excess capacity of the firm.
4) The net profit of the firm should not be affected.
5) The prices will be in effect for one week only.
Given these conditions, the special sale price should be set equal to the:
A) average variable cost of materials only.
B) average cost of all variable inputs.
C) sensitivity value of the variable costs.
D) marginal cost of materials only.
E) marginal cost of all variable inputs.

Question

Quizplus · Accepted Answer

The special sale price should be set equal to the marginal cost of all variable inputs to ensure that the net profit of the firm is not affected by the sale. This is because the marginal cost includes all variable costs associated with producing one additional unit of a product, ensuring that selling additional units at this price covers the variable costs without affecting the overall profit.

The President of Global Wholesalers Would Like to Offer Special