Explain lowballing.
What will be an ideal response?
Lowballing occurs when one party intentionally underestimates or understates a cost. The technique is used in buyer-seller negotiations in industrial situations. For example, after the sellers have signed a final agreement with the buyer team, one of the buyer team members says, "Oh, I forgot to mention that all of our new contracts must specify the free on board (FOB) destination, and the seller must assume all shipping insurance expenses."
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Prepayments for Julianna Company decreased by $2,000 during Year 3, the firm expensed less cash during Year 3 for new prepayments than it expensed prepayments of earlier years. Assume that all prepayments relate to selling and administrative activities. The journal entries that Julianna Corporation made in the accounting records during the year had the following combined effect: Selling and
Administrative Expenses . . . . . . . . . . . . . . 35,500 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,500 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 To explain the change in the statement of cash flows T-account work sheet for Prepayments a. add back $33,050 to net income. b. add back $2,000 to net income. c. subtract $2,000 from net income. d. subtract $33,500 from net income. e. subtract $2,000 from retained earnings.
Answer the following statement(s) true (T) or false (F)
1. When Maytag emphasizes durability and reliability of their products it is using a non price competition strategy designed to build brand loyalty. 2. For most products, as the quantity demanded goes up, price goes up also. 3. The equilibrium point occurs when all units of a product are sold at the highest price, meeting the expectations of both buyers and sellers. 4. The standard markup for products in almost all industries is 50 percent. 5. The purpose of break even analysis is to determine the equilibrium point.
A shareholder is a person who holds a monetary investment in an organization and expects a return on the investment.
a. True b. False
Companies may provide for extra capacity in anticipation of future increases in demand for their products or services. Such extra capacity is called ______.
a. a capacity cushion b. overproduction capability c. waste d. flexible capacity