ACCY130 || QUESTIONS WITH COMPLETE
SOLUTIONS!!
Higher price correct answers Lower revenue as not many people would want to spend that
much money when they could get a similar thing for much cheaper
Cost based (or cost-plus) approach correct answers focused on the cost of producing a
product or rendering a service that can deliver expected return on the investment
benefit of a cost-based (cost-plus) approach correct answers easy to calculate and provide
quick and accurate basis for pricing and focuses on businesses cost which many incentivise
lowering costs. it is also useful for investment decisions ie, investors wanting a return
drawback of a cost-based (cost-plus) approach correct answers major drawback is that it
ignores customer demand and prices calucalted from readily available cost data
cost base + markup = correct answers cost based price
(selling price-cost base) / cost base = correct answers markup
market-based prices correct answers are determined using some measures of market factors
and customers wants and customer demands
benefits of market-based pricing correct answers lead to better decisions about sales volumes
and estimates how competitors would react to a prospective price
drawback of market based pricing correct answers difficult to estimate market demand and
prices and if market price is below cost, then may be an ineffective pricing model
cost + market factor + premium = correct answers Market price
peak load pricing correct answers is the practice of charging different prices at different times
to reduce capacity constraints
price skimming correct answers occurs when a higher price is charged when product or
service is first introduced
penetration pricing correct answers refers to setting low prices when new products are
introduced to increase market share. this makes sense when you are setting a low price early
on to quickly build a large customer base
Price gouging correct answers is the practice of charging a price viewed by customers as too
high or unreasonable
transfer prices correct answers are prices charges for transactions that take place within an
entity
price discrimination correct answers the practice of setting different prices for different
customers
SOLUTIONS!!
Higher price correct answers Lower revenue as not many people would want to spend that
much money when they could get a similar thing for much cheaper
Cost based (or cost-plus) approach correct answers focused on the cost of producing a
product or rendering a service that can deliver expected return on the investment
benefit of a cost-based (cost-plus) approach correct answers easy to calculate and provide
quick and accurate basis for pricing and focuses on businesses cost which many incentivise
lowering costs. it is also useful for investment decisions ie, investors wanting a return
drawback of a cost-based (cost-plus) approach correct answers major drawback is that it
ignores customer demand and prices calucalted from readily available cost data
cost base + markup = correct answers cost based price
(selling price-cost base) / cost base = correct answers markup
market-based prices correct answers are determined using some measures of market factors
and customers wants and customer demands
benefits of market-based pricing correct answers lead to better decisions about sales volumes
and estimates how competitors would react to a prospective price
drawback of market based pricing correct answers difficult to estimate market demand and
prices and if market price is below cost, then may be an ineffective pricing model
cost + market factor + premium = correct answers Market price
peak load pricing correct answers is the practice of charging different prices at different times
to reduce capacity constraints
price skimming correct answers occurs when a higher price is charged when product or
service is first introduced
penetration pricing correct answers refers to setting low prices when new products are
introduced to increase market share. this makes sense when you are setting a low price early
on to quickly build a large customer base
Price gouging correct answers is the practice of charging a price viewed by customers as too
high or unreasonable
transfer prices correct answers are prices charges for transactions that take place within an
entity
price discrimination correct answers the practice of setting different prices for different
customers
