When Johnson Tractor Repair Shop (JTRS) repairs a lawn tractor or small garden tractor for a customer, the tractor is picked up and delivered at no extra charge. When JTRS started business, about half of its customers transported their own tractors, rather than waiting for JTRS to schedule a pickup.
Over the years, the local market for lawn-tractor repair services has become increasingly competitive. JTRS has encountered difficulty in matching competitors' prices and in maintaining market share. A further problem is that the cost of pickups and deliveries has become a financial problem for JTRS, because nearly all of JTRS's remaining customers now request the free pickup and delivery. Most of JTRS's original customers who were able to transport their tractors for service now take their repair business to JTRS's competitors. JTR's competitors all charge extra for pickup and delivery of tractors.
Required:
Answer the following questions:
(1) What cost objects are relevant to JTRS's pricing structure?
(2) If you are a lawn-tractor owner who also owns a small truck, why might you find that JTRS's prices for repair services are not competitive?