Multiple Choice
When Patricia Flagg's friend asked her create something to sell at a holiday boutique food booth, she had no idea she was launching a new business. For her initial product she packaged eleven different kinds of beans, some herbs, and some spices with directions to add a ham hock, water, and vegetables for Minnesota Heartland soup. She has since added Illinois Prairie Corn chowder, which has dry corn, rice, and seasonings, as well as a Louisiana Red Bean gumbo mix and a New England fish soup mix. Each mix makes enough to feed 10 people. Her annual fixed costs are $9,000, and the variable costs for one bag of soup mix are $1.50. An individual bag of soup mix sells for $6.50. In her first year of operation, she sold 3,800 mixes.
-Why did Flagg use cost-plus pricing to set her per-package price?
A) because this method considers the price of her direct competitors
B) because this method incorporates market demand
C) because this method is simple to use
D) because this method recognizes that total unit costs increase or decrease as output expands or contracts
E) because this method gave her the most realistic basis for setting a price
Correct Answer:
Verified
Correct Answer:
Verified
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