Respond to at least two of your peers' posts in a substantive manner. Provide information that they may have missed or may not have considered in regard to why variable-cost pricing can trick managers into setting prices so low that they hurt profits, or worse yet, cause net losses since it does not fully account for fixed costs. Do you agree with your peers' findings? Why or why not?

References:

American AirlinesLinks to an external site.. (https://www.aa.com)

SamsungLinks to an external site.. (https://www.samsung.com/us/

Post 1:

American Airlines primarily provides air transportation services, offering flights for both passengers and cargo. Their prices vary, ranging from a few hundred to several thousand dollars based on factors like distance and class. The airline's costs include salaries, aircraft fuel, maintenance, aircraft rent, landing fees, and advertising. Some of these, such as aircraft rent, are fixed, but many fluctuate based on the number of flights and passengers.

On the other hand, Samsung Electronics is renowned for its diverse product range, with a key product being their Samsung Galaxy smartphones. These devices are priced anywhere from a few hundred to over a thousand dollars, depending on the model. Producing such a smartphone incurs costs like materials, manufacturing, research, marketing, and licensing. Some of these costs, like research, remain fixed within a year, while others like materials change with production numbers.

Between the two, Samsung's Galaxy phones likely have a higher markup on variable costs compared to American Airlines' flight tickets. This is typical for consumer electronics, which often have steeper markups than service industries.

For U.S. investors interested in Samsung, direct stock purchase might seem challenging due to its primary listing on the Korea Exchange. However, they can invest through American Depository Receipts (ADRs), which represent Samsung's shares and are traded on U.S. exchanges. Alternatively, investment can also be channeled through ETFs or mutual funds holding Samsung shares.

Post 2:

American Airlinesoffers various products, including travel for passengers, cargo, and others. They have recently merged with US Air, and the Group has begun to profit from the merger. They fly both regionally and globally, with nearly 6,700 flights per day to approximately 350 destinations, providing customers flexibility and convenience. Although its stocks are currently down, they continue to rise and fall, peeking in July 2023 at over $18.00.

The consumer's product price varies depending on flight date, how far in advance tickets are purchased, global economic conditions, what day of the week the travel begins and ends, round trip or one way, third-party operations costs, and the destination.

The following items are required to produce and sell the travel tickets and impact the price of the tickets:

Aircraft fuel (Variable)

Sales, wages, benefits (Fixed & Variable)

Regional Expenses (Variable)

Maintenance, materials, repairs (Variable)

Rent and landing fees (Fixed & Variable)

Aircraft rent (Fixed)

Selling expenses (Variable)

Depreciation and amortization (Fixed)

I believe that the aircraft fuel has the most considerable markup on variable costs. Fuel cost fluctuation is subject to the same variables as automobile gas prices, including economy stability, availability, and seasonal travel.

Samsungproducts range from earbuds, computers, phones, TVs and Audio, and intelligent appliances. The products are available around the world and help the world stay connected.

Materials (Variable)

Wages and salaries - (Fixed & Variable)

Depreciation - (Fixed)

Utilities - (Variable)

Outsourcing - (Fixed)

Advertising - (Variable)

Taxes (Fixed)

I believe that the materials have the most significant markup on variable costs. Samsung has such a variety of products that need electronic components. Many of the parts are outsourced, causing prices to be variable.

Samsung shares are not readily available in the US. Americans wanting to invest in Samsung must use the Korea Exchange.