Price Discrimination Requires That Different Customers Have Different Levels of Price

question 21

Multiple Choice

Price discrimination requires that different customers have different levels of price sensitivity and that

• A)the cost of production is different for every customer.
• B)customers cannot resell the product amongst themselves.
• C)demand is homogeneous amongst customers.
• D)marginal costs are falling.

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Definitions:

Conversion Costs

The combined costs of direct labor and manufacturing overheads that are incurred in transforming materials into finished goods.

Weighted-Average Method

A costing method that calculates the cost of goods sold and ending inventory based on the average cost of all units available for sale during a period.

Process Costing

A costing method used in production where costs are assigned to processes and then averaged over all units produced.

Job-Order Costing

An accounting method that assigns costs to specific jobs or batches, used in industries where goods or services are produced on a custom basis.