Which one of the following statements is correct concerning bid prices?
A. The bid price is the maximum price that a firm should bid.
B. A firm can submit a bid that is higher than the computed bid price and still break
C. A bid price ignores taxes.
D. A bid price should be computed based solely on the operating cash flows of the
E. A bid price should be computed based on a zero percent required rate of return.
The president of Global Wholesalers would like to offer special sale prices to the firm's
best customers under the following terms:
1. The prices will apply only to units purchased in excess of the quantity normally
purchased by a customer.
2. The units purchased must be paid for in cash at the time of sale.
3. The total quantity sold under these terms cannot exceed the excess capacity of the
4. The net profit of the firm should not be affected.
5. The prices will be in effect for one week only.
Given these conditions, the special sale price should be set equal to the:
A. average variable cost of materials only.
B. average cost of all variable inputs.
C. sensitivity value of the variable costs.
D. marginal cost of materials only.
E. marginal cost of all variable inputs.
The pooling of interests method of accounting:
I. creates an account called goodwill which is recorded on the balance sheet of the
II. consists of simply combining the balance sheets of the acquiring and the target firm.
III. is currently the accounting method required by FASB for all cash acquisitions.
IV. recognizes the excess of the purchase price over the fair market value and records
that excess as an asset of the acquiring firm.
A. I only
B. II only
C. I and IV only
D. II and III only