The pricing objective of maximizing profits must be considered when determining
ID: 2719886 • Letter: T
Question
The pricing objective of maximizing profits
must be considered when determining the price needed to increase market share.
has not been affected by other, more socially focused concerns.
has not always been considered the underlying objective of any pricing policy.
is to be implemented under any and all circumstances.
Development of a transfer price involves
the use of the highest external market price so that the transferring division is very profitable.
computation of the selling and delivery costs of the item being transferred.
the use of a team of lawyers representing the outside interests of the company.
determination of an appropriate profit markup.
The state of Illinois has passed a law requiring that every automobile be inspected at least once a year for pollution control. Anfang Enterprises is considering entering into this type of business. After extensive studies, Joseph Anfang has developed the following set of projected annual data on which to make his decision:
$363,000.00
270,000.00
280,000.00
120,000.00
170,000.00
90,000.00
500,000.00
Anfang believes that his company will inspect 100,000 automobiles per year. The company earns an average of 18.75 percent return on its assets.
The projected cost for inspecting each automobile would be
$12.03.
$12.93.
$10.03.
$11.13.
a.must be considered when determining the price needed to increase market share.
b.has not been affected by other, more socially focused concerns.
c.has not always been considered the underlying objective of any pricing policy.
d.is to be implemented under any and all circumstances.
Explanation / Answer
The pricing objective of maximizing profits must be considered when determining the price needed to increase market share. Therefore, option a is correct.
Development of a transfer price involves determination of an appropriate profit markup. Therefore, option d is correct.
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