Answer:
The correct option is is A, predatory pricing
Explanation:
Predatory pricing is an illegal approach to pricing where a firm fixes a very low price in order to send competitors out of business.
This is very applicable to a firm that has economies of scale where its cost per unit reduces as more and more units are produced, making it possible to undercut competitors without feeling much impact in profitability.
This approach is against the anti-trust law as it paves for a monopoly market,where only one firm operating in the market determines the price which is not likely to be favorable to consumers
Answer:
- $25.50
- 90,000 units
- 140,000 units
Explanation:
1. Current contribution margin ratio
= (Selling price - Variable cost)/ Selling price
= (25 - 19.8) / 25
= 0.208
New Direct labor = 5.0 * ( 1 + 8%)
= $5.40
New variable cost = 19.8 + 0.4 = $20.20
To maintain 0.208
0.208 = (Selling price - 20.20) / Selling price
0.208 * Price = Price - 20.20
0.208Price - Price = -20.20
-0.792Price = -20.20
Price = -20.20/-0.792
Price = $25.50
2. Breakeven = Fixed Cost / Contribution Margin
Contribution Margin = Selling price - Variable cost
= 25 - 19.8
= $5.20
= 468,000/5.2
= 90,000 units
3. To earn $260,000;
= (Fixed Cost + 260,000) / Contribution margin
= (468,000 + 260,000) /5.2
= 140,000 units
Answer: B
Explanation: Cockroaches have a strong oily odor from them.
