A Company Follows a Skimming Strategy as Part of Introducing

question 159

Multiple Choice

A company follows a skimming strategy as part of introducing a new product to:

• A)capitalize on the price sensitivity of early buyers and to postpone breakeven.
• B)help recover costs of development and to capitalize on the price insensitivity of early buyers.
• C)discourage competitors and build unit volume.
• D)move the product into the maturity stage once primary demand has been created.

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Definitions:

Direct Materials Cost

The expense of raw materials and components directly used in the production of a product.

Sales

The activities involved in selling products or services, including marketing, negotiation, and transaction processes.

Desired Profit

The amount of net income that a company aims to achieve within a specific period.

Contribution Margin Ratio

The contribution margin ratio is a financial metric that measures the proportion of revenue that exceeds total variable costs, indicating how much of each sale contributes to covering fixed costs.