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A firm is determining the price of a new product and uses a mark-up of 50%. If direct out-of-pocket cost is $50,000 and fully loaded manufacturing cost is $150,000, what price should be suggested if the firm uses cost-plus pricing?a.) $75,000b.) $150,000c.) $200,000d.) $225,000
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- Which of the following is NOT mentioned in the text as an advantage of cost-plus pricing systems?a.) They are legally acceptable and in certain cases may be required.b.) If sales are made, they should be profitable with this pricing method.c.) Assuming costs are known, the pricing task is simple.d.) Prices are matched to market realities.
- Zoe's bakery operates in a perfectly competitive industry. The variable costs at Zoe's Bakery increase, so all of the cost curves (with the exception of fix cost) shift leftward. The demand for Zoe's pastries does not change, nor does the firm shut down. To maximize profits after the variable cost increase, Zoe's Bakery will ___ its price and ___ its level of production. a. decrease; increaseb. raise; increasec. do nothing to; decreased. raise; decrease
- According to the text, cost-plus pricing is focused internally and does not take into account external market realities.