The Owner of BargainSmartphones

question 9

Multiple Choice

The owner of BargainSmartphones.com is determined to drive competitors such as CheapPhones.com out of business. He has plenty of money to invest in building his business, so he has instructed his marketing manager to slash prices by 25% to 50% on nearly every product until there aren't any other online cell phone retailers left. Which of the following statements is true about this situation?

• A) This business owner is probably guilty of tax evasion.
• B) This business owner could be using illegal loss-leader pricing tactics.
• C) This business owner is most likely guilty of price discrimination.
• D) This business owner is probably violating the Robinson-Patman Act.

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Definitions:

Machine-Hours

A measure of production time, used as a basis for allocating manufacturing overhead costs based on the number of hours machines are operated.

Job M598

A specific production or project task within a job order costing system, identified by the code M598 for tracking its associated costs and progress.

Unit Product Cost

The total cost to produce one unit of product, including materials, labor, and overhead.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or job orders, calculated prior to the start of the accounting period based on estimated costs and activity levels.