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Hello,
i have trouble understanding part C of hammer (pg 112 BPP). i do understand that inclusion of fixed costs will set a higher price which will lower demand. but this question is of four marks and i dont uderstand what else to write in a question like this. Please help me out.
The points worth making are:
Both approaches ignore the effect of the selling price on the demand.
Both approaches ignore the prices charged by competitors
How to decide on the % to add on to the cost in both cases.
How to absorb the fixed costs between the products in the case of absorption cost plus pricing.
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