Pharmaceuticals with High Fixed Costs Can Benefit with the Practice

question 124

Multiple Choice

Pharmaceuticals with high fixed costs can benefit with the practice of price discrimination because:

• A) high fixed costs create incentive for pharmaceuticals to sell more.
• B) charging different prices to different customers generates different levels of fixed costs.
• C) profit from customers paying high prices allows pharmaceuticals to cover part of the fixed costs.
• D) extra profit from customers paying low prices allows pharmaceuticals to cover part of the fixed costs.

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Definitions:

Raw Materials Inventory

Refers to the total cost of all the materials that are used in the production of goods but have not yet been transformed into finished products.

Work-In-Process Inventory

Inventory that includes goods partially completed but not yet ready for sale; found between raw materials and finished goods stages.

Freight Costs

Expenses associated with the transportation of goods from one location to another.

Cost Of Goods Sold

The direct costs associated with producing goods that a company sells, including materials and labour, used to determine gross profit.