Which one of the following statements best describes characteristics of the growth phase of the product life cycle?
Answer (B) is correct. During the growth stage of the product life cycle, competitors begin entering the market, driving down prices for the product.
Which one of the following is not a characteristic of market-based costing?
Answer (C) is correct. Market-based pricing is a strategy used by sellers in competitive markets, in other words, in those markets where there is stiff competition.
Edward Sporting Ltd. is introducing a new product. Management considers the sales life cycle to strategically determine pricing on this innovative product. They decide to price the new product low to generate excitement. Which one of the following pricing approaches did management implement?
Answer (C) is correct. Penetration pricing is the practice of setting an introductory price relatively low to gain deep market penetration quickly.
Harding, Inc., prices its main product by adding 30% to the manufacturing cost per unit.
Harding’s variable manufacturing costs are $12 per unit, variable selling and administrative costs are $1 per unit, and fixed manufacturing costs per quarter total $2,000,000. Anticipated quarterly sales were 50000 units Harding’s market has become more competitive with similar companies offering a selling price of $60 per unit. This has resulted in decreased demand for Harding’s product causing actual quarterly sales to be 40000 units Harding’s selling price per unit for the next quarter should be
Answer (D) is correct. Harding should price its main product at $60.00 per unit to be more competitive with its competition.
A corporation produces and sells floor tiles. The corporation has five retail stores, each located in a different city. Each store has a different pricing schedule to maintain the lowest prices in its respective city. This is an example of
Answer (A) is correct. This pricing involves basing prices on the product’s perceived value and competitors’ actions rather than on the seller’s cost Nonprice variables in the marketing mix augment the perceived value. Market comparables, which are assets with similar characteristics, are used to estimate the price of a product.
Which one of the following pricing methods takes into consideration a product’s entire life cycle?
Answer (A) is correct. A target price is the expected market price for a product or service, given the company’s knowledge of its consumers’ perceptions of value and competitors’ responses. Subtracting the unit target operating income determines the long-term unit target cost. Relevant costs are all future value-chain costs, whether variable or fixed.
Which one of the following statements best represents the order of the steps in developing target prices?
Answer (C) is correct. The company must determine market price, calculate target cost, and then use value engineering to reduce costs.
A firm in which of the following industries is most likely to use a market-based as opposed to a cost-based approach to pricing decisions?
Answer (C) is correct. Market-based pricing involves basing prices on the product’s perceived value and competitors’ actions rather than on the seller’s cost Market-based pricing is typical when there are many competitors and the product is undifferentiated.
A pharmaceutical company is preparing to release a new medication. The controller would like to consider the product life cycle in pricing, costing, and budgeting decisions for the product. The statement below that best represents the time span that the controller should consider is the time from initial
Answer (C) is correct. The product life cycle begins with R&D, proceeds through the introduction and growth stages, continues into the product’s mature stage and finally ends with the harvest or decline stage and the final provision of customer support.
Target cost per unit is the difference between target
Answer (B) is correct. A target price is the expected market price for a product or service, given the company’s knowledge of its consumers’ perceptions of value and competitors’ responses. Subtracting the target operating income per unit, which is the operating profit the company wants to make on each sale, will yield the target cost per unit.