Explain the concept of overdemand
What will be an ideal response?
One of the factors that prompts a firm to increase its prices is overdemand. When a company cannot supply all its customers, it can raise its prices, ration supplies, or both. It can increase its price in the following ways:
• Delayed quotation pricing - The company does not set a final price until the product is finished or delivered. This pricing is prevalent in industries with long production lead times, such as industrial construction and heavy equipment.
• Escalator clauses - The company requires the customer to pay today's price and all or part of any inflation increase that takes place before delivery. Escalator clauses are found in contracts for major industrial projects, such as aircraft construction and bridge building.
• Unbundling - The company maintains its price but removes or prices separately one or more elements that were part of the former offer, such as free delivery or installation. Car companies sometimes add higher-end audio entertainment systems or GPS navigation systems as extras to their vehicles.
• Reduction of discounts - The company instructs its sales force not to offer its normal cash and quantity discounts.
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What will be an ideal response?
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Indicate whether the statement is true or false
On a statement of cash flows prepared using the direct method, if inventory has decreased from one accounting period to another, net purchases will be greater than the cost of goods sold because net purchases during the period have exceeded the dollar amount of the items sold during the period
Indicate whether the statement is true or false
The responsibility for the fixed overhead volume variance should be assigned to:
a. the purchasing manager. b. the production manager. c. the human resource manager. d. the CEO. e. None of the answers are correct.