Use the Following to Answer Question

question 39

Multiple Choice

Use the following to answer question:
Figure 10.7
-(Figure 10.7) Suppose a firm has two types of customers but cannot tell which type of buyer the customer is before a purchase is made. If the firm wanted to use quantity discounting, it should charge _____ per unit for any quantity purchased or _____.

• A) $12; $4 per unit for 4 or more units
• B) $12; $7 for 3 or more units, but the pricing scheme would not be incentive-compatible for Type B customers
• C) $7; $4 for 2 or more units, but the pricing scheme would not be incentive-compatible for Type A customers
• D) $8.50; $4 for 3 or more units

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Definitions:

Total Materials Costs

The total expense incurred by a company for the materials that are used in the production process of its goods or services.

Manufacturing Cost

Direct expenditures involved in creating goods, such as components, employee wages, and additional production overhead.

Conversion Cost

The combination of labor and overhead costs incurred to convert raw materials into finished products.

Materials Cost

The total expense incurred in acquiring raw materials used in the manufacturing process of products.