632598256894

If it is determined that dumping has indeed taken place, then the U.S. International Trade
Commission (ITC) will impose an import duty on the foreign product involved. This duty will be
sufficiently high to boost the U.S. selling price up to the same level as the home market price.
Dumping has a large potential impact on businesses and industries in our economy. By extension,
production cost is also a subject that successful businesspeople will find profitable to understand.
Notes
1 Note that on a unit basis fixed costs will decline as output increases, but variable costs are assumed
to be relatively static. This can be confusing, so when discussing cost structure ensure that all
discussants have the same orientation.
2 This is where accountants deviate from the economics. Within this relevant range, accounting
assumes that the variable cost per unit remains constant, whereas economists assume scale and scope
factors will impact the per-unit variable cost rate. As long as the relevant range estimate is relatively
narrow, the accounting assumptions will not cause material error.
3 Computerworld, July 7, 1990.
4 If they were material they would be scrutinized, but for Company X they comprise less that 3% of
sales.
5 Those who want to test their understanding of this technique should use the data in Exhibit 12.1 to
verify Exhibit 12.2 results.
6 As long as Company X utilizes excess facilities, the cost structure will not change. If the 10%
increase necessitated an additional build-out of infrastructure, the fixed costs would increase.
7 In Europe this term is often called drop-through.
8 The final two sections of this chapter were written by John Leslie Livingstone for earlier editions of
this book. They are reproduced here in their entirety.
13
Activity-Based Costing