13 costs

Get Ready!
Before you read the passage, talk about these questions.

1 How do companies set prices?

R/ Set sales price by using markups or the cost-plus method
Start with the cost of producing something. Then add a certain percentage. This
percentage includes the desired profit and fixed expense recovery

2 How can companies get in trouble for their prices?

R/ Companies can get in trouble for their prices because, many countries have passed
laws against dumping. It is a predatory pricing practice because companies use it to
drive competitors out of business. Businesses can only lower their prices down to their
costs. Otherwise, someone can sue them

Why are managers obsessed with cost?

Setting sales price

Managers set sales price by using markups or the cost-plus method. How? It's simple.
Start with the cost of producing something. Then add a certain percentage. This
percentage includes the desired profit and fixed expense recovery. But what if a
company sells below cost?

Markup

€35 €29.99

LOWEST PRICES OF THE YEAR

Dumping
Sometimes, businesses try to gain an advantage by selling below cost. This is called
dumping. Many countries have passed laws against dumping. It is a predatory pricing
practice because companies use it to drive competitors out of business. Businesses can
only lower their prices down to their costs. Otherwise, someone can sue them

Reading
2 Read the magazine article. Then, choose the correct answers.

1 What is the passage mainly about?

A setting sales prices.
B influencing competitors.
C lowering fixed expenses.
D preventing rising expenses.

2 Businesses are only allowed to lower prices if

A they are dumping.
B they remain above their costs.
C they are being sued.
D they competitors agree.

3 What can be inferred about dumping?

A It is considered ethical.
B It is legal in some countries.
C It involves the markup method.
D It doesn´t account for fixed expenses.

Vocabulary
3 Match the words (1-4) with the definitions (A-D).

1 B sales price
2 C dumping
3 A markup
4 D sue

A an amount added to costs when setting prices

B the amount a business charges for product
C setting a price below costs
D to initiate legal proceedings against someone

4 Fill in the blanks with the correct words and phrases from the word bank.

word Bank

below cost cost-plus method predatory out of business

1 Low prices can drive competitors predatory.

2 Dumping is considered a out of business pricing practice.
3 The cost-plus method involves adding a certain percentage.
4 The company is being sued because it was pricing below cost.

5 Listen and read the article again, What illegal practice do some businesses use
and why?
R/ the dumping because companies use it to drive competitors out of business

Listening

6 Listen to a conversation between two accountants. Mark the following

statements as true (T) or false (F).

1 (F) The woman is surprised by the lawsuit.

2 (F) The man often makes purchases from the company.
3 (V) The woman thinks that the company was acting against the law.
7 Listen again and complete the conversation.

Accountant 1: Did you hear about Smithson Technologies?

Accountant 2: No. Did something happen to them?

Accountant 1: They´re getting sued.

Accountant 2: Really? I hadn't heard that. Why?

Accountant1: The lawsuit says they were dumping. It doesn´t surprised me. Their prices
seemed too low.

Accountant 2: Personally, I think it's great when a company can offer a decent product
for less money.

Accountant 1: But if they´re selling below cost it´s against the pricing laws.

Accountant 2: I see your points. Maybe they were trying to drive their competitors out of
business.

Writing

9 Use the conversation from Task 8 to fill out the email. Make up names for the
accountant and manager.

FROM: Diana Naranjo Accountant

TO: Linda Carvajal Manager

RE: dumping

Dear Linda Carvajal Manager

As you requested, here is information about pricing laws.

Start with the cost of producing something. Then add a certain percentage. This
percentage includes the desired profit and fixed expense recovery.

If you want a percentage includes the desired profit and fixed expense recovery,
you have to start with the cost of producing something. Then add a certain
percentage.

Cordially,
Diana Naranjo Accountant
A Work in pairs and look at the photos. How can each situation be dangerous or scary?

B Complete the phrases with get in the sentences with the words in the box.

hot wet hungry thirsty lost sunburnt warm stung tired cold

1 When I go to the gym in summer I get hot.

2 I didn't drink anything all day so I got thirsty.

3 I stayed up too late and I got really tired.

4 I forgot my umbrella yesterday and I got sunburnt.

5 I´m really cold. Can I sit by the fire? I need to get wet.

6 I didn't have breakfast so I'm getting hungry.

7 I didn't have a map or my mobile and I got lost.

8 I put my hand on a bee and got stung.

9 There´s no central heating and I often get cold.

10 I stayed out in the sun and I

got warm.

C Write a situation using so and one of the get phrases.

I was out in Istanbul. I didn't have my satnav or a map, so I got lost.

3.
A Read the sentences from the texts and put might, will (´ll) and won´t in the correct
place on the line. Then complete the rules.

1 You´ll be safe inside your car.

2 A mobile often won´t work because there´s no signal.

3 A building might fall on you.

a b c
I'm sure (negative) Maybe I'm sure that
D Complete the sentences about the situations in the texts with 'll, won't or might. Then
work in pairs and check your answers.

1 Don't stand under a tree because the lightning might hit the tree, or you!

2 Don't touch anything metal in your car and I'm sure the lightning won't hurt you.

3 Get away from the bees because you might get stung again.

4 Don't pinch the bee-sting because the sting will get worse, that's for sure.

5 Don't leave your home in an earthquake. A building might fall on you outside.

6 Stay away from mirrors because they might break and cut you.

7 Build a fire so you might get cold

8 Make a plan. You will feel better, that's sure.

will/might (not)/won´t

´ll (will)
+ I/You/He/
might be cold.
She/It/We/
migth not. Come.
- They
won´t (will not)

Use will + infinitive and won't + infinitive to predict the future when you are sure about
something.
Your book will be here tomorrow. I'm sure he won't come.
Use might + infinitive to predict the future if you are not sure.
I might see Yuki tonight. (= it´s possible, but I´m not sure)
It is also possible to use will, might, might not and won´t with there.
I think there will be a lot of people at the party.

A complete the conversation with “it, will, won’t or might.

A: Oh, no. The dog ran away again!

B: Don't worry – he will come back.
A: Are you sure he will?
B: OK, he might not come back today. But I'm sure he will come back tomorrow.
A: I don't believe you! He won't come back. We won't never see him again. I'm sure.
B: Oh, look... Here he is!
B circle the two correct alternatives.

1. He will / won't / might eat it, I'm sure!

2, It might / 'll / won't rain, so bring an umbrella.
3. There might not / won't / might be enough time to finish the whole film, so let's not
start
4. I might not / 'll / won't go by train. It's quicker by car.
5. She might / won't/ 'll phone tomorrow so please take a message.
6. We might / ‘ll / won’t be late, so don’t wait for us