Given the Payoff Matrix in Table 25

question 16

Multiple Choice

$$\begin{array}{l}\begin{array} { | l | l | l | } \hline & { \text { Company XYZ's Possible Responses } } \\\hline \text { Company ABC's Action } & \text { Charge High Prices } & \text { Charge Low Prices } \\\hline \text { Charge high prices } & \text { Profit gain loss } = \$ 0 & \text { Profit loss } = \$ 5,000 \\\hline \text { Charge low prices } & \text { Profit gain } = \$ 50,000 & \text { Profit loss } = \$ 500 \\\hline\end{array}\\\text { Table } 25.1\end{array}$$ Given the payoff matrix in Table 25.1, if the probability of rivals matching a price reduction is 99 percent, what is the expected payoff for a price cut by Company ABC?

• A) $0.
• B) $5.
• C) -$500.
• D) -$5,000.

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Definitions:

Cost Object(s)

Any item, activity, or project for which separate measurement of costs is desired, facilitating targeted expense management and financial efficiency.

Indirect Labor

This term describes labor costs not directly associated with the production of goods or services, such as maintenance and supervisory personnel.

Factory Utilities

Expenses associated with the utilities consumed in a factory, such as electricity, gas, and water, used during the manufacturing process.

Overhead Allocation Base

A measure or criterion used to distribute overhead costs among various products, services, or departments.