Title: Business economics assignment

Essay Details

Subject: Business
Author: Jane R
Date: September 20, 2015
Level: University
Grade: C
Length: 2 / 589
No of views: 0
Essay rating: good 0, average 0, bad 0 (total score: 0)

Essay text:

If AC closes to MC, then close to max. 2. The potential problem of cost plus pricing is that the supplying division may have the opportunity to pass on operating inefficiencies to the purchasing division in the form of higher prices where no predetermined cost is agreed between divisions, this problem can arise in the short-term as well as the longer term...

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As the amount of profit for the supplying division is determined by the amount of cost incurred, this can lead to a situation where the division can actually increased its profit through greater inefficiency. The purchasing division must bear the burden of any increased costs in the supplying division and, unless these costs can be passed on to customers in the form of higher prices, profit of purchasing division will be reduced...

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