Samuels Company Is Considering Pricing Its 10,000-Gallon Petroleum Tanks Using

question 152

Multiple Choice

Samuels Company is considering pricing its 10,000-gallon petroleum tanks using either variable manufacturing or full product costs as the base. The variable cost base provides a prospective price of $6,000 and the full cost base provides a prospective price of $6,100. Which of the following explains the difference in the two prices?

• A) the estimated amount of profit
• B) the variable cost base estimates fixed costs in the markup percentage while the full cost base includes an amount for fixed costs
• C) there is no explanation since this is known as price discrimination
• D) the difference is caused by the inability to estimate fixed cost per unit with any degree of reliability

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Definitions:

Strategic Business Unit Level

A distinct part of a larger corporation, focused on a specific strategic objective or market sector.

Targeted Customers

A specific group of consumers identified as the primary audience for a product or service, based on shared characteristics or needs.

Overall Strategy

A comprehensive plan detailing how a business or organization will achieve its goals and objectives.

Strategic Business Unit Level

A division or unit within a larger organization that operates with its own mission, vision, and objectives, and focuses on specific market segments.