If a Firm Has Excess Capacity, Which of the Following

question 94

Multiple Choice

If a firm has 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 covering the company's fixed costs and profit.
• C) Base the bid solely on direct labour hours.
• D) Common fixed costs must be allocated to individual jobs before preparing the bid.

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