Jian Has Entered into a Contract with the Federal Government

question 14

Multiple Choice

Jian has entered into a contract with the federal government to design a computer simulation model for training helicopter pilots. The contract calls for the final price to be set at a fixed percentage profit over and above her cost of production. This seems to represent a:

• A) cost-based pricing strategy.
• B) supply and demand formula.
• C) demand-based pricing strategy.
• D) price leadership pricing strategy.

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Definitions:

Accounts Receivable

Due amounts from clients to a company pertaining to goods or services delivered but payment not received.

Bad Debts Expense

An estimated expense that reports the cost of accounts receivable that a company does not expect to collect.

Aging

The process of categorizing accounts receivables based on the length of time an invoice has been outstanding to determine their collectability.

Accounts Receivable

An asset account representing money owed to a business by its customers for goods or services delivered on credit.