A Skimming Pricing Strategy

question 194

Multiple Choice

A skimming pricing strategy

• A) allows low-income households the ability to purchase a particular good or service.
• B) drives competitors out of business in order to achieve a monopoly position in the market.
• C) creates a "common man" image to reach a larger market.
• D) establishes a high price in order to earn the highest possible profit while there is little competition.

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Definitions:

Discount Period

The timeframe during which a discount is offered for early payment on sales made on credit, aiming to encourage prompt payment.

Credit Period

The duration of time a buyer is allowed to pay for goods or services purchased on credit, typically measured in days from the invoice date.

Sales Returns and Allowances

A deduction from gross sales that reflects products returned by customers or allowances granted for damaged or unsatisfactory goods.

Contra-Sales Account

An account used to record sales returns, allowances, and discounts which offsets the gross sales on the income statement.