When Establishing Product-Line Pricing, the Price Differentials Between Items in the Line

question 62

Multiple Choice

When establishing product-line pricing, the price differentials between items in the line should make sense to customers and reflect differences in terms of the

• A) perceived value of the products offered.
• B) actual costs of the features offered.
• C) perceived risk.
• D) quantity discounts and price allowances offered.
• E) market segments targeted.

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Definitions:

Absorption Costing

A pricing approach that incorporates all expenses related to manufacturing, such as direct materials, direct labor, and all manufacturing overhead costs, whether they are fixed or variable, into the product's cost.

Net Operating Income

The profit generated from a company's core business operations, excluding income and expenses from unusual, non-operating items.

Operating Loss

A financial situation where a company's operating expenses exceed its gross profits or revenues.

Absorption Costing

A pricing strategy that incorporates every manufacturing expense - such as direct materials, direct labor, along with variable and fixed overhead costs - into the price of a product.