Premium Pricing Can Be Used to Effectively Wean Out Low-Profit

question 76

True/False

Premium pricing can be used to effectively wean out low-profit customers during off-peak capacity utilization times and bring demand down.

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Definitions:

Differential Cost

The difference in total cost between two alternatives in making a business decision.

Differential Revenue

The difference in revenue generated from two different business actions or decisions, helping to assess the financial impact of each choice.

Contribution Margin

The difference between sales revenue and variable costs, used to cover fixed costs and to generate profit.

Target Costing

A method of price setting that combines market-based pricing with a cost-reduction emphasis; the target cost is the expected selling price less the desired profit.