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When the Economy Is Characterized by High Inflation,special Pricing Tactics

question 62

Essay

When the economy is characterized by high inflation,special pricing tactics are often necessary.One popular cost-oriented tactic is culling low-profit margin products from the product line.Why might this tactic backfire? What two other cost-oriented tactics can be used to guard against inflation? Describe these tactics.


Definitions:

Net Operating Income

The income generated from a company's everyday business operations, indicating the profitability from core operations before interest and taxes.

Contribution Margin

The amount by which sales revenue exceeds variable costs of a product, used to cover fixed costs and generate profit.

Return On Investment

An evaluation metric employed to assess the effectiveness or financial gain of an investment, or to compare the effectiveness among several investments.

Manufacturing Cycle Efficiency

A metric that measures the efficiency of the manufacturing process by comparing value-added time to total throughput time.

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