Assume That the Value of a Base Model Computer to an Average

question 32

Multiple Choice

Assume that the value of a base model computer to an average consumer is $300, the average price that Dell can charge a consumer for that product is $275, and the average unit cost of producing that product for Dell is $150. For this scenario, which statement is true?

• A) Dell can easily increase its price above $300.
• B) The profit for Dell on each computer is $150.
• C) The consumer surplus per computer is $25.
• D) The higher the intensity of competitive pressure, the higher the price that Dell can charge relative to $300.
• E) The lower the consumer surplus, the greater the value for the money the consumer gets.

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Definitions:

Adjusted Cost of Goods Sold

The cost of goods sold figure after it has been adjusted for returns, allowances, and any other adjustments.

Unadjusted Cost of Goods Sold

The initial calculation of the cost of goods sold that does not factor in any adjustments like returns or allowances.

Unadjusted Cost of Goods Sold

The initial calculation of the cost of products sold before any adjustments or corrections are made.

Total Manufacturing Cost

The aggregate of all costs—direct materials, direct labor, and manufacturing overhead—incurred in producing finished goods.