Sony Management Decided to Use Skimming as a Pricing Strategy

question 177

Multiple Choice

Sony management decided to use skimming as a pricing strategy for its newest line of high-definition television (HDTV) sets. It should be aware that this strategy does not

• A) generate capital to cover research and development costs.
• B) discourage competitors from entering the market.
• C) provide flexibility in the introductory base price.
• D) protect the firm from covering costs if prices are set too low.
• E) reduce the stress that may be placed on the firm's production capabilities.

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Definitions:

Abnormal Wastage Costs

Expenses related to the unexpected loss or wasteful use of resources beyond what is considered standard or normal.

Transportation Costs

Expenses associated with the movement of goods or materials from one location to another, including shipping fees, fuel costs, and logistical expenses.

Over-Allocated Overheads

A situation where the allocated overhead costs exceed the actual overhead costs incurred.

Actual Overheads

The total amount of indirect costs that a business incurs during production, which may include costs related to utilities, rent, and salaries.