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

question 93

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.The difference between the two prices is ________.

• A) the estimated amount of profit
• B) that the variable cost base estimates fixed costs in the markup percentage while the full cost base includes an amount for fixed costs
• C) known as price discrimination
• D) caused by the inability of most companies to estimate fixed cost per unit with any degree of reliability

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Definitions:

Risk-Averse Investor

An investor who prefers lower returns with known risks rather than higher returns with unknown risks.

Slope of the Budget Line

The rate at which one good can be traded for another, reflecting the relative prices of two goods.

Standard Deviation

An indicator that calculates how much a group of figures deviates or scatters from each other.

Risky Asset

An asset that carries a significant degree of risk of losing value, but also offers the potential for higher returns as compared to safer investments.