Question

9) Should a company with high fixed costs and unused capacity raise selling prices to try to fully recoup its costs? 10) List and briefly describe the six steps in estimating a cost function under quantitative analysis. 11) Explain what revenues and costs are relevant when choosing among alternatives. 12) Define engineered and discretionary costs and give two examples of each.

Answer 1

9. No, a company with high fixed cost and unused capacity raise selling prices to try to fully recoup its cost. Because it will result it decrease of sales as will result in ultimately loss to the company. Hence, company should not raise prices.