Which of the Following Statements Regarding Absorption Cost Pricing Formulas

question 11

Multiple Choice

Which of the following statements regarding absorption cost pricing formulas is/are true?
i. Absorption cost pricing formulas provide a justifiable price that tends to be perceived as equitable by all parties.
ii. Since absorption cost information is necessary for external reporting, it is cost effective to use it for pricing.
iii. Absorption cost-plus pricing formulas generally will result in a higher mark-up percentage than variable manufacturing cost formulas.

• A) i and ii
• B) ii and iii
• C) i and iii
• D) All of the given answers

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Definitions:

Free-Rider Problem

A situation in a shared-resource system where individuals consume more than their fair share or pay less than their fair share of the cost.

Free-Rider Problem

A situation where individuals consume a public good without contributing to its cost, undermining the provision of that good.

Public Goods

are commodities or services that are provided without profit to all members of a society, either by the government or a private individual or organization.

Rival

In economics, a good or service that cannot be enjoyed by more than one person or group at the same time without diminishing its availability to others.