If a Firm Has No Excess Capacity, Which of the Following

question 66

Multiple Choice

If a firm has no excess capacity, which of the following is a sensible bidding strategy?

• A)Set a price to cover all costs.
• B)Base the bid on the incremental costs incurred because the job will contribute toward the company's profit.
• C)Base the bid solely on direct labour hours.
• D)Downplay the potential impact of competitors.
• E)Try to minimize the company's tax liability.

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Definitions:

Net Realizable Value

The estimated selling price of goods, minus the estimated costs of completion and the costs necessary to make the sale, often used in inventory valuation and accounts receivable.

Notes Receivable

Financial claims against debtors documented through promissory notes that promise to pay the amount due with interest.

Bad Debt Expense

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

Promissory Note

A written, legally binding promise to pay a specified sum of money on a certain date or upon demand.