If a company 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 towards the company's cost and profit.
C)Base the bid solely on direct labour hours.
D)Downplay the potential impact of competitors.
E)Allocate common fixed costs to individual jobs before preparing the bid.

Question

Quizplus · Accepted Answer

Bidding based on incremental costs ensures that the company will cover its direct costs and make a profit from the excess capacity. This approach also considers the potential impact of the additional job on the company's overall costs and profitability. The other options (A, C, D, and E) do not take into account the full costs and profitability implications of the excess capacity.

If a Company Has Excess Capacity, Which of the Following