Final answer:
Sod Wholesale may experience fluctuating surfboard prices due to changes in raw material costs and market demand. Using the cost-plus pricing method would be recommended for Spada Manufacturing.
Step-by-step explanation:
If Sod Wholesale is experiencing large fluctuations in the prices of surfboards sold by Spada Manufacturing, it could be due to several reasons:
- Changes in the cost of raw materials: If the cost of materials used to manufacture the surfboards fluctuates significantly, it will impact the final price of the surfboards.
- Market demand and competition: The demand for surfboards can vary, and if there is intense competition in the market, Spada Manufacturing may need to adjust prices to maintain its competitiveness.
Out of the two methods described in the requirements, it would be recommended for Spada Manufacturing to use the cost-plus pricing method. This method is straightforward and ensures that the selling price reflects the manufacturing cost and provides a consistent profit margin. It also allows for easier adjustments if there are fluctuations in the manufacturing cost.